Motives of the Firm -unit 3 Flashcards Preview

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Flashcards in Motives of the Firm -unit 3 Deck (11)
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1
Q

Where does revenue max occur

A

When MR = 0

2
Q

Why do firms profit max

A

Satisficing behaviour

3
Q

Why do firms sales max

A

To gain market share

4
Q

Why do firms revenue max

A

To make sufficient profit to satisfice shareholders

5
Q

What is predatory pricing and the short/long run effects

A

Pricing below costs to drive out other firms

Short run - loss
Long run - other firms leave so prices are raised to levels that would not have been possible with competition b

6
Q

What is limit pricing.

A

Pricing at a low enough level to discourage entry of new firms.
Achieved through economies of scale

7
Q

Give examples of non pricing strategies

A
Advertising
Investment in branding
Packaging
Customer service
Warranties
Mergers to reduce competition
8
Q

Where does profit max occur

A

When mc = Mr

9
Q

Where does sales max occur

A

When ac = ar

10
Q

What is Satisficing behaviour

A

Just enough profit to keep stake holders happy, allowing for other motives to be pursued

11
Q

What is a stakeholder

A

People who have vested an interest in the form and include shareholders. Employees, managers, customers, suppliers, governments and trade unions