2022

Knowledge:
definition: revenue maximisation, conditions, graph (MR=0)

1. Lower prices (price-competitiveness): market share

2. Compared to profit maximisation, they can increase their sales
3. Principal-agent problem (divorce of ownership and control):
4. Compared to sales maximisation, they can still make supernormal profits
(investment, innovation)

evaluation (in which extent, the business will not aim to maximise revenue), other
objectives:
1. Profit maximisation
2. Sales maximisation
3. Revenue maximisation will just be a short-run objectives (monopolist, profit
maximisation)
4. Depends on the nature/state contestability of market.
5. Value judgement (conclusion): producer will set revenue maximisation as long-run
objectives or not.

Knowledge: business objectives, define the profits,

Analysis:
1. Profit maximisation (supernormal profits)
2. Revenue
3. Sales
4. Profit satisfaction (divorce of ownership and control)*
5. Social objectives (social cooperatives)
Evaluation:
1. They are not aware the point of profit maximisation
2. State-owned enterprises (profit-oriented projects)
3. Business objectives can change depending on xxx
Macroeconomic conditions (growth-set objectives to make more profits (can be used
to invest/takeovers) /increase market share)
 contestability of the market
government legislation or regulation
4. Conclusion/value judgement: short-run; long-run.

Analysis: (why businesses aim to grow)

1. Economies of scale (lower cost)
2. Increase market share (price-maker)profits *(MC reducedAC reduced) MR, AR
shiftsincrease in supernormal profits
(sales/revenue maximisation, set price at profit maximisation)
3. Reputations (easier to finance)
4. Balance the power; Monopsony (to negotiate with suppliers or workers)
5. Risk diversification (conglomerate integration)

Evaluation:
1. Diseconomies of scale (administrative costs, communication chain is too long. Etc.)
2. Government regulation (tend to improve the contestability of the market)
3. Other business objectives, depend on the wish of entrepreneurs (social enterprises)
4. The owner may tend to stay small and keep total control of all aspects in production
(entrepreneurs)
5. Depends on the goods/services provided (specially-designed)
6. Conclusion.