objectives of firms
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AL11RAN:
If you look at his diagram, you will see that the AC curve is still under the MC and AR curve.
Your points about allocative and productive efficiency and the point of normal profit still hold true with his diagram.
I'm not sure what your last point meant; perhaps you could be a bit clearer?
3 years ago 4
All Comments (41)
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The last sentence is probably the most ideal way to remember this, thanks for that.
very good for revision
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Thanks for the video! Is it possible to have greater insight of each type of firm motivation? Also, are there other possible motivations such as predatory pricing?
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@bayarchingo yeah - or firms could try and have a war with other competitors. The firm reduces prices so that it makes losses hoping that the other firms wil also incur larger losses and be priced out of the market indefinately. Leaving a situation where there are fewer firms.
Firms would only do this if they think they are most cost efficient than other firms.
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@pajholden what about selling enough to establish "brand loyalty" or a good exposure of the product to more customers? wouldn't that increase profit in the long run anyway?
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fdfvdks
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thank you Phil!
Spent ages trying to find a decnt explination with a simple diagram!
thanks!!
1 year ago 2
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@timberwolves03 oh gosh i feel sorry 4 u mine is only half of that and its painful for me
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here we go people: my 3hr class in 2min49sec!
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Hey Paj great vid how you doing?
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Great video again Phil, just wondering if anyone could tell me why firms would revenue or sales maximise?
My text book says revenue maximisation is all about divorce of ownership and control and greater revenue allows better perks for managers but surely a large revenue would also just mean greater costs and therefore with less profit how could a firm afford bigger headquarters etc?
Sorry I just can't see any real reason for anything other than profit maximisation
Cheers guys
musicaltourettes 2 years ago
Managers (not shareholders) may see the benefit of revenue or sales maximisation and not profit maximisation as managerial reward is based on size of business and these maximisation models lead to a higher output than profit maximisation and so managers are in control of greater volumes of factor inputs like labour and so are better paid. Owners can attempt to encourage managers to think like owners by giving them share options, profit-linked bonuses etc.
pajholden 2 years ago 9