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Firms' Objectives
Profit Maximisation

This occurs when a firm aims to aim their profits by producing at an output where supernormal
profits are at their greatest. This is where marginal costs equal marginal revenue BUT
marginal costs MUST be rising.




From the graph we can deduce that when output is…

Page 2

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This tends to be a better strategy for firms since they are more likely to have a bigger market share
if they adopt sales revenue maximisation rather than profit maximisation.

Sales Volume Maximisation

This occurs when a firm wants to maximise the number of units sold and in turn maximise…

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This economic theory was developed by the US economist Herbert Simon. He argued that the
decision making within a firm results from the interaction between many competing groups with a
firm. As they have conflicting views the best solution is satisficing. This is a compromise between the
different groups in…

Comments

davidsalter

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This is a 4 page summary of the objectives of firms including some of the required graphs.

Angus Cheetham

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About the graph for profit maximising, isnt the MC and MR lines the other way round?

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