Revenue maximisation

Cards (5)

What is revenue maximisation?
The output at which the marginal revenue gained from selling one more unit is 0
How do firms decrease revenue maximisation?
By decreasing price to the point where the extra revenue is balanced by the reduced price
How does a firm's stock impact revenue maximisation?
If firms have to dispose their stock, then costs don't become relevant as revenue is not taken into account
How do differing objectives impact revenue maximisation?
If a business is managed by different people there will be different objectives, which is the principal-agent problem, as shareholders want maximum profit whereas managers want maximum revenue
How does a merger in the near future impact revenue maximisation?
If a firm is about to be taken over by another, it may be valued by its revenue, leading to the firm trying to maximise it to ensure the sale price is as high as possible