The objectives of firms

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when total income or revenue for a firm is greater than total costs
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total revenue
what the firm receives for the sale of its product = price X number sold
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average revenue
total revenue / number sold
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marginal revenue
the addition to total revenue from the production of one extra unit.
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total profits
total revenue minus total costs
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normal profits
the amount required to keep a factor employed in its present activity in the long run.
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Profit maximisation
where a firm chooses a level of output where MC=MR
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supernormal profits
a return above normal profits - a surplus payment
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sub-normal profits
profit below normal which should lead to the firm leaving the industry
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individual who organises the factors of production in order to make a profit
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Public Limited Company (PLC)
a firm owned by a group of shareholders whose shares can be traded on the London Stock Exchange
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a private enterprise firm incorporated with The Registrar of Companies
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an individual elected by a company's shareholders to set corporate policies
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non-monetary benefits like an expensive car provided by the firm
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financial return from the ownership of shares (equities) in a firm
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share options
the right to buy or sell stock at an agreed price
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Annual General Meeting (AGM)
annual meeting where shareholders can discuss the accounts and elect directors
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Activist shareholders
shareholders that will clamour for greater dividends and may mobilise other shareholders to oppose the management
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hostile bid
a bid to buy shares in an attempt to gain control of the firm which is opposed by the firm's directors who fear job loss
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the firm is producing satisfactory but not maximum profit
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firms, organisations or individuals with an interest in the firm
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carbon footprint
the amount of greenhouse gases produced measured in terms of carbon dioxide
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corporate citizenship
indicates that organisations embrace sustainable development
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market share
percentage of the total market held by the company
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market power
when a firm has the ability to exert significant influence over the quantity of goods traded or the price at which they are sold
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Rational choice theory
where all costs and benefits are considered before a decision is taken
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Capital market discipline
where firms may be taken over by other firms if they appear to be making lower profits than their assets would suggest
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refers to the practice of removing the stock of a company from a stock exchange so that investors can no longer trade shares of the stock on that exchange.
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turning invention into commercial use; introducing a new product or process
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horizontal integration
where two firms at the same stage of production combine
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vertical integration
where firms at different stages of production combine
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conglomerate merger
where firms with no obvious connection combine
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lateral merger
a particular type of horizontal merger
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Card 2


what the firm receives for the sale of its product = price X number sold


total revenue

Card 3


total revenue / number sold


Preview of the back of card 3

Card 4


the addition to total revenue from the production of one extra unit.


Preview of the back of card 4

Card 5


total revenue minus total costs


Preview of the back of card 5
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