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Title: Edexcel A2 Economics Unit 3.3.1 What objectives do firms have?
Description: A2 Economics Notes for the Edexcel Board A* Level All notes available.
Description: A2 Economics Notes for the Edexcel Board A* Level All notes available.
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Edexcel Economics A2 Notes
Unit 3
Unit 3 – Business Economics and Economic Efficiency
3
...
1 What objectives do firms have?
A firm is an organisation that uses factors of production to produce goods
or services
...
Objectives –
Targets or goals set
by an organisation
...
On a diagram profit maximisation
occurs at MR = MC
...
This results in a larger market share
...
Ø Sales Maximisation
This is when firms try to maximise sales
...
Only normal profit will be produced
...
A solution is satisficing, which is a compromise between different groups in
the firm, which may be seen as satisfactory
...
Satisficing –
Compromises
between different
groups in the firm,
which may be seen
as satisfactory
...
-
There is higher producer surplus when firms are profit maximising, as output is low and the
price is high
...
The Principal-Agent Problem
Stakeholders are likely to have differing objectives; this is called the
principal-agent problem
...
Principal-Agent
Problem – When
the manager does
not always act in the
best interest of their
shareholders
Title: Edexcel A2 Economics Unit 3.3.1 What objectives do firms have?
Description: A2 Economics Notes for the Edexcel Board A* Level All notes available.
Description: A2 Economics Notes for the Edexcel Board A* Level All notes available.