CIMA BA1 · Chapter 4 · Question 8 of 9
A firm faces the demand curve P = 80 - 0.5Q, so its marginal revenue is MR = 80 - Q. Marginal cost is constant at $20 per unit. What output will the firm produce if its objective is to maximise sales revenue rather than profit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) 80 units
Explanation
Revenue is maximised where MR = 0: 80 - Q = 0, so Q = 80 units. For comparison, profit is maximised where MR = MC: 80 - Q = 20, giving Q = 60 units. 120 units is where price equals marginal cost and 160 units is where price falls to zero.
More Goals of organisations and stakeholders MCQs
- Q1In the assessment of value for money in a not-for-profit organisation, 'effectiveness' refers to:
- Q2In financial and economic theory, the primary objective of a commercial company is usually assumed to be:
- Q3Which of the following is an example of the principal-agent problem?
- Q4Using Mendelow's power-interest matrix, a stakeholder group with high power and high interest in an organisation's strategy should be:
- Q5The concept of 'satisficing' suggests that managers: