Microeconomics: Business Objectives | OCR A-Level Economics (H460)

Microeconomics: Business Objectives

72 questions
6 subtopics
Component 01: Microeconomics
Component 01 and Component 03

Business Objectives is examined on component 01 of OCR Economics, Microeconomics.

72 recall questions across 6 subtopics.

Sample questions from Microeconomics: Business Objectives

Answer each one closed book first, then open the answer.

Profit maximisation and alternative business objectives

A firm abandons profit maximisation for revenue maximisation. What happens to its price and output?

Show the answer
Output rises and price falls, because the firm keeps expanding past the point where marginal cost equals marginal revenue until marginal revenue reaches zero.
Profit maximisation and alternative business objectives

What does utility maximisation mean as a business objective?

Show the answer
It means managers or owners pursuing their own satisfaction — status, perks, a larger department or an easier working life — rather than the greatest possible profit for the firm.
Corporate social responsibility and the principal-agent problem

Which information failure lies behind the principal-agent problem?

Show the answer
Asymmetric information — the agent knows far more about their own effort and the firm's day-to-day position than the principal can observe.
Corporate social responsibility and the principal-agent problem

How does the intensity of competition affect a firm's freedom to choose an objective?

Show the answer
In highly competitive markets firms must maximise profit, or at least minimise costs, simply to survive, whereas firms with market power have the slack to satisfice or pursue social and managerial goals.
Fixed, variable, average and marginal costs

Define marginal cost.

Show the answer
Marginal cost is the addition to total cost from producing one more unit of output.
Fixed, variable, average and marginal costs

A firm's total cost is £700 at 10 units and £760 at 11 units. Calculate the marginal cost of the eleventh unit and the average total cost at 11 units.

Show the answer
Marginal cost is £760 − £700 = £60, and average total cost is £760 ÷ 11 = £69.09 per unit to two decimal places.
Diminishing returns and economies and diseconomies of scale

Define economies of scale.

Show the answer
Economies of scale are the reductions in long run average cost that a firm enjoys as the scale of its output increases.
Diminishing returns and economies and diseconomies of scale

Define diseconomies of scale and name three causes.

Show the answer
Diseconomies of scale are rises in long run average cost that set in when a firm grows too large. Three causes are coordination and control problems, communication breakdowns, and falling worker motivation in a large impersonal organisation.

The 6 subtopics

One subtopic is one session. Work down the list.

Subtopic	What it covers	Questions
Profit maximisation and alternative business objectives	Recall questions on profit, sales revenue and sales volume maximisation, growth, utility maximisation, profit satisficing by managers, and social welfare objectives of firms.	11
Corporate social responsibility and the principal-agent problem	Recall questions on corporate social responsibility, the principal-agent problem and the divorce of ownership from control, and what shapes a firm's choice of objective.	13
Fixed, variable, average and marginal costs	Recall questions on fixed, variable, total, average and marginal costs with worked calculations, the marginal cost and average cost relationship, and the short run versus the long run.	10
Diminishing returns and economies and diseconomies of scale	Recall questions on the law of diminishing returns and product curves, internal and external economies of scale, diseconomies of scale, minimum efficient scale and scale as a barrier to entry.	16
Total, average and marginal revenue	Recall questions on total, average and marginal revenue calculations, why average revenue is the demand curve, marginal revenue for price takers and price makers, and elasticity where marginal revenue is zero.	9
Profit, loss and normal and supernormal profit	Recall questions on profit and loss calculations, the profit-maximising rule, accounting, normal, supernormal and economic profit, and the short run shutdown decision.	13

Microeconomics: Business Objectives is 72 of the 1,226 questions in the guide.Get the guide, £8

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.

Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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.
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.