Profit maximisation is assumed to be the objective of a firm, however there are other objectives that firms have, these include: revenue maximisation and sales maximisation. A firm aiming to maximise profit will aim to operate at output level Q, where Marginal Revenue (MR) is equal to Marginal Cost (MC). A process that companies undergo to determine the best output and price levels in order to maximize its return. The company will usually adjust influential factors such as production costs, sale prices, and output levels as a way of reaching its profit goal. There are two main profit maximization methods used, and they are Marginal Cost-Marginal Revenue Method and Total Cost-Total Revenue Method.
Profit Maximization is the process that a firm uses to establish where the best output and price levels are, in order to maximize its return. There are two primary methods that can be used to establish profit maximization. One method is the Marginal Revenue minus the Marginal Cost (MR-MC) method. When utilizing this method economists assume that profit would be at its highest when MR and MC are equal, which denotes that for every item made MP=MR-MC. When / if MR is higher than MC then MP would result in a profit for Company A.
If the interest rate is low, it will cause more funds to be available, greater expansion and increased employment. If the interest rate is high, it will cause fewer funds to be available, less expansion, and decreased employment. Fiscal policy is an important tool for managing the economy because of its ability to affect the total amount of output produced or the gross domestic product. The first impact of a fiscal expansion is to raise the demand for goods and services. This greater demand leads to increases in both output and prices.
(p. 204) The pay-mix component in which benefits is likely to be largest is ______________. A. work-life balance b. security or commitment c. performance driven d. market watch 10. (p. 207) Which of the following is not a consequence of level of competitiveness of total compensation? a. increase probability of union-free status B. increase organization profitability c. reduce voluntary turnover
This is when the objective of the firm is achieving as high a total revenue as possible and occurs when marginal revenue is equal to zero, as shown on the graph. Another objective of a firm may be profit satisficing, where a firm makes a reasonable level of profit that satisfies its stakeholders without maximising profit. Examples of this in the leisure market may include businesses that have only just set up, as they perhaps do not have the work force to maximise profits yet and instead settle for a satisfying level of profit. The final objective of a business may be utility maximisation. Utility maximisation is the aim of trying to achieve as much satisfaction as possible.
c). The transfer price of an intermediate product that has an imperfectly competitive external market for the for the product exists when the transfer price of the intermediate product is given at the point at which the net marginal revenue of the marketing division of the firm is equal to the marginal cost of the production division at the best total level of output of the intermediate product, and the price charged in the external market is given on the external demand curve. DQ13) The advantages of cost plus pricing is that it leads to approximately the profit-maximizing price because firms usually apply higher markups for products facing less elastic demand than for products with more elastic demand. p This involves calculating the average variable cost of producing the normal or standard level of output , adding an average overhead charge so as to get the fully allocated average cost for the product. The disadvantages for cost-plus pricing is that it may be very difficult to
To accept a project, the IRR is equal to or greater than or equal to the required rate of return. If the IRR is less than the required rate of return, then it is rejected. IRR is important to organizations as it’s typically in line with the goal of maximizing shareholder wealth. The NPV is the Net Present Value. NPV can be defined as a capital-budgeting decision criterion defined as the present value of the free cash flows after tax less the project’s initial expenditure.
Relative to the perfectly competitive equilibrium, the equilibrium outcome for a market dominated by a monopsonist will be higher prices and lower levels of good demanded. c. Government intervention in perfectly competitive markets will lead producer surplus to increase at a cost to consumers surplus. d. Government intervention in perfectly competitive markets will make markets more efficient. e. When regulating a natural monopolist, the government will require the firm to charge prices equal to the perfectly competitive firms’ price. f. A Nash Equilibrium implies
The elastic VS inelastic states that the law of demand depends by how much quantity demanded responds to a price change. When a price change causes larger change in quantity demanded then the price would be elastic. However when a price change causes smaller then the demand is elastic. The law of demand states that as prices raise the people would like to buy less and the quantity demanded falls. As the prices fall, the people would like to buy more and the quantity demanded increases.
Federal subsidies are a contentious point in public economics. They are supposed to benefit small businesses in theory but in reality large corporations are usually the ones that gain the most. This paper seeks to determine if there is any advantage to granting federal subsidies. An analysis of the impact federal subsidies (independent variable) have on the amount of corporate taxes paid (dependent variable) will determine the extent of the social benefits of subsidies. Subsidies in effect lower the cost of production which implies that, other things equal, profits should increase for a given quantity of output.