Business Objectives | Edexcel A-Level Economics A (9EC0)
Business Objectives
- 22 questions
- 2 subtopics
- Theme 3: business behaviour and the labour market
- Paper 1 and Paper 3
Covers what a firm is actually trying to do: profit, revenue and sales maximisation and satisficing, where each sits on a cost and revenue diagram, and why managers may not pursue what owners want..
It covers profit, revenue and sales maximisation, and satisficing and business objectives on a cost and revenue diagram.
Sample questions from Business Objectives
Answer each one closed book first, then open the answer.
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Profit, revenue and sales maximisation, and satisficing
Explain why total revenue is maximised when MR = 0.
Show the answer
At this output, total revenue is at its maximum because any additional unit sold would reduce total revenue (MR would become negative). -
Profit, revenue and sales maximisation, and satisficing
Why might a firm pursue revenue maximisation as its objective?
Show the answer
To increase market share, achieve economies of scale, or because managers are rewarded based on sales. -
Business objectives on a cost and revenue diagram
If a firm's MR curve has not yet reached the horizontal axis, what does this indicate about its current output relative to revenue maximisation?
Show the answer
The firm is producing below the revenue-maximising output; it could increase total revenue by expanding output until MR = 0. -
Business objectives on a cost and revenue diagram
What would happen to a sales-maximising firm if it expanded output beyond the point where AC intersects AR?
Show the answer
Average cost would exceed average revenue, causing the firm to make a loss on each additional unit and reducing overall profitability below normal profit.
The 2 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Profit, revenue and sales maximisation, and satisficing | Recall questions on the output rule for each objective, the reasons a firm adopts one over another, and the principal-agent problem behind satisficing. | 13 |
| Business objectives on a cost and revenue diagram | Recall questions on locating each objective on a diagram, and on how output and price compare between them. | 9 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
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Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
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Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
Edexcel A-Level Economics A Active Recall Guide
Every topic, not just this one. 2,508 questions with their answers.