Managerial Economics August 15‚ 2007 The key points underpinning the economics of a profit maximizing firm Neoclassical model of the firm states that organization will have the main objective of maximizing its profit within a given period of time. Maximum profit was achieved at the output at which marginal cost is equal marginal revenue. There are several factors which need to be considered when talking about the profit maximizing firm: 1. The assumption of the profit maximizing firm is that
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PROFIT MAXIMISATION IN ZIMBABWE The traditional economist’s view is that firms are profit maximizes‚ with each decision based on the need to maximize profits (Griffiths and Wall‚ 2005). Although the assumption of profit maximization has come under repeated criticism‚ it still remains relevant to the Zimbabwean firm today irrespective of size. To begin with‚ a profit objective is often the principal reason for the original formation of the smaller companies‚ the majority of which are under the direct
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long run objectives. In the short run a firm is able to make only slight or minor adjustments in the production process as well as in business conditions. The plant capacity in the short run is fixed and as such‚ it can increase its production and sales by intensive utilization of existing plants and machineries‚ having over time work for the existing staff etc. Thus‚ in the short run‚ a firm has its own technical and managerial constraints. But in the long run‚ as there is plenty of time at the disposal
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is extensively used and highly useful for the purpose of cash management. As per the model‚ cash and inventory management problems are one and the same. William J. Baumol developed a model (The transactions Demand for Cash: An Inventory Theoretic Approach) which is usually used in Inventory management & cash management. Baumol model of cash management trades off between opportunity cost or carrying cost or holding cost & the transaction cost. As such firm attempts to minimize the sum of the
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JUSTIFYING SHAREHOLDER WEALTH MAXIMISATION Alan D Morrison Programme Director‚ The Oxford Finance Programme for Senior Executives; Professor of Finance‚ Saïd Business School CORPORATE OBJECTIVES AND CORPORATE FINANCE The Role of the Corporation Corporate fi nance is the branch of economics that concerns itself with the ways in which corporations fi nance their activities. If we want to think clearly about this topic‚ we need a simple model of the corporation. Figure 1 is about the simplest
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To what extent was Britain able to retain control over decolonisation in Africa between 1959 and 1964? By 1959 decolonisation in British Africa was well under way‚ for example‚ the Gold Coast in West Africa had become independent in 1957‚ Nigeria and Sierra Leone were well on their way to independence‚ and agitation and advances towards independence were already taking place in Kenya and Tanganyika in Eastern Africa. By 1964 this had spread throughout Britain’s African territories and many more
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Profit maximisation has been one of the main aims of the firms. The generally accepted view is the long run will wish to maximize profit. Marginal Cost and Marginal Revenue can be used to find the profit maximising level of output. Marginal cost is the addition to total cost of one extra unit of output. Marginal revenue is the increase in total revenue resulting from an extra unit of sales. Economic theory predicts that profits will be maximised at the output level where marginal cost equals maginal
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SHAREHOLDER WEALTH MAXIMISATION: SUMMARY ‘Business Finance’ assumes that the objective of a company is to maximise shareholder wealth. This means that companies should attempt to maximise the value of the shareholders’ investment in the company. This is achieved by maximising ‘Total Shareholder Returns’: dividends and share price appreciation. The most powerful basis for understanding and measuring shareholder wealth is the ‘economic valuation model’‚ under which the value of the shareholders’
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Facts about this decade --- Population: 151‚684‚000 (U.S. Dept. of Commerce‚ Bureau of the Census)* Unemployed: 3‚288‚000 Life expectancy: Women 71.1‚ men 65.6 Car Sales: 6‚665‚800 Average Salary: $2‚992 Labor Force male/female: 5/2 Cost of a loaf of bread: $0.14 Bomb shelter plans‚ like the government pamphlet You Can Survive‚ become widely available Important Historic and Cultural Events 1950 - Pres. Harry Truman ( ’til 1952) approves production of the hydrogen bomb and sends
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Conversational Selling Top agents makes as much as 30% of their business from for sale by owners (FSBO). Anyone who wants to build a bigger and stronger business will prospect FSBOs since they are a constant and continuous source of business. Don’t let somebody talk you out of this great prospecting source‚ because FSBOs should be a key component in building your business. We have included a few steps in which we are outlining the conversational selling process. Contact Landvoice at 888-678-0905
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