Figure 1 will help you remember. The maximization of benefits occurs in a quantity of production in which the marginal cost is equal to the marginal income. This is easier to understand with the help of a diagram. The benefit maximization rule states that MC %3D MR, as shown in Figure 1 at point M.
Let's see why profit is maximized right now. Other objectives may be more crucial to the company than maximizing profits. Maximizing revenues (at point R) can help companies to increase their quantities produced and, at the same time, to reduce their prices compared to the prices of profits (at point P) or the maximization of sales (at point S). We read the price from the average income curve (AR) at point P, which gives us the price, Pm, and the quantity, Qm, to maximize profits.
Clearly, at the time of maximizing revenues, prices are lower and quantities are higher than those determined to maximize benefits. Therefore, companies may be willing to opt for revenue maximization rather than profit maximization. In order to maximize revenues, the company can reduce competition by charging lower prices and taking market share away from its competitors. The satisfaction principle refers to sacrificing profits to satisfy as many key stakeholders as possible.
The word satisfy comes from “satisfy” and “sacrifice”. Stakeholders can be anyone related to the company, including consumers, employees, shareholders, unions, or the government. Each stakeholder may have a different motive for running the business, so their primary goal isn't to maximize profits. Corporate social responsibility has been gaining importance in recent times.
More and more companies are aspiring to be socially responsible, to gain the trust of customers and to be environmentally friendly. This allows them to be within government rules and regulations. The managers who control the company know the daily life of the company and may have objectives of maximizing revenues, such as offering their employees better benefits, health benefits, bonuses, etc. On the other hand, owners or shareholders may have the objective of maximizing profits to obtain better returns and increase the value of their shares.
Is maximizing profits the main objective of a company? In conventional theory, maximizing profits is the main objective of companies. However, many companies may have other objectives, such as maximizing sales, surviving in the market, maximizing revenues, among others. Customer Satisfaction, Job Satisfaction, Corporate Social Responsibility. Why is corporate social responsibility important? Corporate social responsibility (CSR) includes activities undertaken by companies to create a positive impact on society and the environment.
Benefit maximization occurs when marginal cost equals marginal revenues. What does the principle of satisfaction mean? The satisfaction principle refers to sacrificing profits to satisfy as many key stakeholders as possible. The word satisfy comes from “Satisfy” and “Sacrifice”. A satisfactory principle usually occurs when interested parties have conflicting interests.
A satisfactory principle usually occurs when stakeholders have ___________ The objective of maximizing sales is achieved when the average cost is equal to the average revenue, which is also ___________. A goal is something that the company wants to achieve over a specific period of time. It is presumed that the sole objective of companies is to obtain profits. What are the five main (common) objectives of companies? Do you explain each of them with examples?.
The five key business performance objectives for any organization include quality, speed, reliability, flexibility and cost. For many companies and their owners, maximizing profits is the most important objective: trying to produce and sell the level of production where the difference between total revenues and total costs is greatest. Sometimes, companies may not have a profit maximization objective, since they cannot determine their actual marginal cost and marginal revenues. This goal is often very common among small business owners who want to live comfortably and enjoy time with their families, but don't want to work too hard to earn even more money.
Even companies that don't compete on price want to keep their costs as low as possible while maintaining the levels of quality, speed, reliability and flexibility that their customers demand. When it comes to business performance objectives, you probably know that efficiency and productivity are crucial. Managers can have goals of ___________, while owners or shareholders can have a goal of ___________. Companies can pursue the goal of maximizing sales, which can also be referred to as maximizing growth.
All companies can have varied objectives depending on their ___________, the nature of the business, competition, and other factors. The essential guide to OKRs will show you how to create an Objectives & Key Results process that you can implement throughout the organization to track your performance objectives. The company must maintain good relations with the supplier for a regular supply of quality raw materials. The economic objectives of companies refer to the objective of obtaining benefits and others that include the creation of customers, periodic innovations and the best possible use of available resources.
The goal of maximizing sales is achieved when the average cost is equal to the average income, which is also ___________. .
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