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Description
Flashcards by Sophie Knight, updated more than 1 year ago
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Created by Sophie Knight
about 7 years ago
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| Question | Answer |
| What is a stakeholder? | Groups who have an interest in the activity and performance outcomes of a business. |
| Give 3 likely objectives for an owner or shareholder | 1) Higher profits 2) Higher share prices 3) Higher dividends |
| Give 3 likely objectives for directors and managers | 1) New markets / market share 2) Higher sales 3) Career development |
| What is organisational theory? | Assuming that a firm is a coalition of different groups that will have different objectives |
| Name the 3 conditions that profit satisficing will tend to occur in | 1) High market power levels 2) Divorce of ownership from control 3) Low levels of contestability |
| How is Profit maximising shown on a diagram? What conditions need to be met for this to be possible? | Producing at the output where MC = MR -Owners control the management of the business - Assumes sufficient and accurate knowledge of costs and revenue so that MC and MR can be found |
| How is revenue maximisation shown on a diagram? | Where MR = 0 |
| What was William Baumol's theory regarding the objective of revenue maximisation? | That manager-controlled firms would be more likely to aim for revenue as the larger the size of the firm, the higher the likely pay and benefits would be for the mangers. |
| How is sales maximisation shown on a diagram? | Where AC = AR Means that only normal profit is made |
| Why might firms be aiming for sales maximisation? | To gain market share Maximise long run profit (may be a limit pricing strategy) |
| How is allocative efficiency shown on a diagram? | AC = MC |
| What is "satisficing"? | Making just enough profit to keep stakeholders happy, allowing for other motives to be pursued. |
| What are 4 examples of pricing strategies to gain market share or increase profitability? | 1) Predatory Pricing 2) Limit Pricing 3) Price wars 4) Price Discrimination |
| What are 4 disadvantages of predatory pricing? | 1) Making a loss in the short run 2) Risky as it doesn't always push competition out of the industry 3) Illegal so risks fines 4) Dependant on the ability to cross-subsidise |
| What are 7 examples of non-pricing strategies? | 1) Branding 2) Advertising 3) New Product Development 4) New production methods 5) Product quality and differentiation 6) Mergers/takeovers 7) Collusion |
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