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That priority affects the price it chooses and the quantity it decides to produce."},{"text":"It determines the tax the firm pays and the wages it offers.","correct":false,"explanation":"Tax and wages are influenced by government policy, labour markets and business costs, but they are not the main direct effect described here. The objective shapes the firm's price and output decisions."},{"text":"It fixes the market demand for the firm's product and the costs it faces.","correct":false,"explanation":"A firm's objective cannot fix market demand or eliminate its costs. Demand and costs constrain decisions, while the chosen objective influences the price set and output produced."},{"text":"It controls the number of competitors in the market and the technology the firm uses.","correct":false,"explanation":"The objective does not directly determine how many competitors exist or which technology is available. It primarily affects the firm's chosen price and output."}]},{"id":"5f01afc9-b9f6-42ec-a321-1e56a7df6d1b","cardType":"basic","points":2,"front":"Why does the divorce of ownership from control encourage alternative business objectives?","back":"Managers may pursue growth, status or an easier life instead of maximum profit.","mcqOptions":[{"text":"Managers may pursue growth, status or an easier life instead of maximum profit.","correct":true,"explanation":"When shareholders own the firm but managers control decisions, managers may have personal objectives that differ from profit maximisation, including growth, status or reduced effort."},{"text":"Managers may pursue lower taxes, higher wages or cheaper inputs instead of maximum profit.","correct":false,"explanation":"These are possible business concerns, but they do not explain the principal-agent problem. The separation allows managers to pursue personal aims such as growth, status or an easier life."},{"text":"Managers may pursue higher prices, lower output or fewer customers instead of maximum profit.","correct":false,"explanation":"These choices are not the characteristic alternative objectives created by separated ownership and control. Managers may instead favour growth, status or reduced effort over maximum profit."},{"text":"Managers may pursue greater dividends, more voting rights or direct ownership instead of maximum profit.","correct":false,"explanation":"Dividends, voting rights and ownership belong mainly to shareholders, the principals. The managerial separation encourages agents to pursue objectives such as growth, status or an easier life."}]},{"id":"68f97122-6f61-44c2-9386-4cf0db652b09","cardType":"basic","points":1,"front":"In a listed plc such as BP, who are the principals and who are the agents?","back":"Dispersed shareholders are the principals; salaried directors are the agents.","mcqOptions":[{"text":"Dispersed shareholders are the principals; salaried directors are the agents.","correct":true,"explanation":"Principals are the owners who provide capital and expect returns. In a listed plc ownership is dispersed among shareholders, while salaried directors control operations as agents."},{"text":"Salaried directors are the principals; dispersed shareholders are the agents.","correct":false,"explanation":"This reverses the agency relationship. Shareholders own the company and are therefore the principals, while directors make decisions on their behalf and are the agents."},{"text":"Customers are the principals; salaried directors are the agents.","correct":false,"explanation":"Customers are stakeholders but do not generally own or direct the plc on whose behalf directors act. The principals are dispersed shareholders, and the agents are salaried directors."},{"text":"The government is the principal; dispersed shareholders are the agents.","correct":false,"explanation":"The government may regulate a listed plc, but it is not normally the owner represented by its directors. Dispersed shareholders are the principals, while salaried directors are the agents."}]},{"id":"be6da96c-32f9-4481-8258-84370ae4a167","cardType":"basic","points":2,"front":"Why might directors in a listed plc pursue revenue or growth targets?","back":"Their pay may be linked to revenue or growth rather than maximum profit.","mcqOptions":[{"text":"Their pay may be linked to revenue or growth rather than maximum profit.","correct":true,"explanation":"If remuneration depends on sales revenue or the size and growth of the business, directors gain a personal incentive to pursue those targets instead of maximising shareholder profit."},{"text":"Their pay may be linked to profit or dividends rather than maximum revenue.","correct":false,"explanation":"Pay linked to profit would encourage profit maximisation, not revenue or growth targets. The relevant incentive is remuneration based on revenue or business growth."},{"text":"Their pay may be linked to market prices or tax rates rather than maximum growth.","correct":false,"explanation":"Market prices and tax rates are not normally the managerial performance measures behind this objective. Directors may pursue revenue or growth when their pay is tied to those outcomes."},{"text":"Their pay may be linked to cost reduction or lower output rather than maximum revenue.","correct":false,"explanation":"Cost reduction and lower output do not explain why directors would target revenue or growth. Bonuses based on revenue or growth can shift decisions away from maximum profit."}]},{"id":"c77047c9-63fb-4db6-9c18-1e071891e2d0","cardType":"basic","points":2,"front":"Why does producing below the profit-maximising output increase profit?","back":"An extra unit adds more to revenue than to cost.","mcqOptions":[{"text":"An extra unit adds more to revenue than to cost.","correct":true,"explanation":"Below the profit-maximising output, marginal revenue exceeds marginal cost. Producing one more unit therefore increases total revenue by more than total cost, raising profit."},{"text":"An extra unit adds more to cost than to revenue.","correct":false,"explanation":"That relationship would reduce profit, not increase it. Below the profit-maximising output, marginal revenue is greater than marginal cost, so each additional unit raises profit."},{"text":"An extra unit adds equally to revenue and to cost.","correct":false,"explanation":"Equal marginal revenue and marginal cost means the firm is at the profit-maximising condition, not below it. Profit rises below that output because marginal revenue exceeds marginal cost."},{"text":"An extra unit adds more to profit than to revenue.","correct":false,"explanation":"Profit is the difference between revenue and cost, so it cannot increase by more than the additional revenue from the same unit. The key condition is that marginal revenue exceeds marginal cost."}]},{"id":"31173d7a-844f-4bb0-aea1-958d6e5c91c6","cardType":"basic","points":2,"front":"Why does producing beyond the profit-maximising output reduce profit?","back":"Marginal cost exceeds marginal revenue, so the extra unit costs more than it earns.","mcqOptions":[{"text":"Marginal cost exceeds marginal revenue, so the extra unit costs more than it earns.","correct":true,"explanation":"Beyond the profit-maximising output, marginal cost is greater than marginal revenue. Each further unit therefore reduces total profit because its additional cost exceeds its additional revenue."},{"text":"Marginal revenue exceeds marginal cost, so the extra unit earns more than it costs.","correct":false,"explanation":"This is the condition for profit to increase when output expands, not decrease. Beyond the maximum, marginal cost exceeds marginal revenue, making each extra unit loss-making."},{"text":"Average cost exceeds average revenue, so the extra unit costs more than it earns.","correct":false,"explanation":"Average values describe the whole output rather than the effect of one additional unit. The relevant comparison is marginal cost versus marginal revenue, with marginal cost becoming higher."},{"text":"Fixed cost exceeds marginal revenue, so the extra unit costs more than it earns.","correct":false,"explanation":"Fixed cost does not change when one extra unit is produced, so it cannot determine the effect of that unit. Marginal cost exceeding marginal revenue causes profit to fall."}]},{"id":"5dfbe4eb-00cc-4a43-998f-99595430e3ad","cardType":"basic","points":1,"front":"Where is profit maximisation shown on a cost and revenue diagram?","back":"At the output where the MC curve cuts the MR curve from below.","mcqOptions":[{"text":"At the output where the MC curve cuts the MR curve from below.","correct":true,"explanation":"Profit is maximised where marginal cost equals marginal revenue and MC is rising through MR. The phrase cuts from below identifies the correct intersection rather than the minimum-profit crossing."},{"text":"At the output where the MC curve cuts the MR curve from above.","correct":false,"explanation":"This is the direction associated with the other intersection and does not identify a maximum. Profit maximisation occurs where MC cuts MR from below as output increases."},{"text":"At the output where the AC curve cuts the AR curve from below.","correct":false,"explanation":"That relationship concerns average revenue and average cost, often indicating normal profit in a sales-maximisation context. Profit maximisation is located using the MC and MR curves."},{"text":"At the output where the MR curve cuts the MC curve from below.","correct":false,"explanation":"The crossing direction is reversed. The maximum-profit condition is where MC cuts MR from below, meaning MC rises through MR as output increases."}]},{"id":"625ff38b-c836-49b6-a5ce-7e325523eab0","cardType":"basic","points":2,"front":"Why does total revenue peak when marginal revenue is zero?","back":"Before this output, marginal revenue is positive; afterwards, it becomes negative.","mcqOptions":[{"text":"Before this output, marginal revenue is positive; afterwards, it becomes negative.","correct":true,"explanation":"Total revenue rises while each additional unit adds positive revenue. It peaks when marginal revenue reaches zero, then falls once additional units make marginal revenue negative."},{"text":"Before this output, marginal revenue is negative; afterwards, it becomes positive.","correct":false,"explanation":"This reverses the relationship between marginal and total revenue. Total revenue rises when marginal revenue is positive, peaks at zero marginal revenue, and falls when it becomes negative."},{"text":"Before this output, marginal revenue is zero; afterwards, it becomes positive.","correct":false,"explanation":"Zero marginal revenue marks the peak itself, not the period before it. Positive marginal revenue comes before the peak, followed by negative marginal revenue."},{"text":"Before this output, marginal revenue is constant; afterwards, it remains zero.","correct":false,"explanation":"Marginal revenue need not be constant and does not remain zero after total revenue peaks. It is positive before the peak and negative afterwards."}]},{"id":"e45c4123-789c-4162-8f6d-1df8b1cfcc14","cardType":"basic","points":3,"front":"How does revenue maximisation differ from profit maximisation in price and output?","back":"It gives a higher output and a lower price.","mcqOptions":[{"text":"It gives a higher output and a lower price.","correct":true,"explanation":"Revenue maximisation occurs where marginal revenue is zero, beyond the profit-maximising output. Moving further along the demand curve means a higher quantity is sold at a lower price."},{"text":"It gives a lower output and a higher price.","correct":false,"explanation":"This is the usual direction of profit maximisation relative to revenue maximisation, not the reverse. Revenue maximisation involves expanding output and accepting a lower price."},{"text":"It gives a higher output and a higher price.","correct":false,"explanation":"Along a downward-sloping demand curve, selling more requires lowering price. Revenue maximisation therefore gives higher output but lower price than profit maximisation."},{"text":"It gives a lower output and a lower price.","correct":false,"explanation":"Revenue maximisation does not reduce output relative to profit maximisation. It occurs at a larger quantity, with the lower price needed to sell that quantity."}]},{"id":"df138e65-2694-4578-ad2e-855ba8933686","cardType":"basic","points":2,"front":"Why might managers choose revenue maximisation?","back":"Their bonuses or status may depend on sales revenue rather than profit.","mcqOptions":[{"text":"Their bonuses or status may depend on sales revenue rather than profit.","correct":true,"explanation":"Managers may receive rewards, recognition or influence from achieving high sales revenue. This creates an incentive to maximise revenue even when a different output would produce greater profit."},{"text":"Their bonuses or status may depend on profit rather than sales revenue.","correct":false,"explanation":"Profit-based rewards would encourage profit maximisation, so they do not explain revenue maximisation. The relevant incentive is bonuses or status linked to sales revenue."},{"text":"Their bonuses or status may depend on costs rather than sales revenue.","correct":false,"explanation":"Cost performance can influence managerial rewards, but it is not the specific reason managers may target revenue. Sales revenue or business scale may determine bonuses or status."},{"text":"Their bonuses or status may depend on dividends rather than sales revenue.","correct":false,"explanation":"Dividends are returns to shareholders and are more closely associated with profitability than revenue alone. Managers may pursue revenue when their own rewards depend on sales performance."}]},{"id":"63e06ca4-77f3-4647-95e8-9c7ce47e80da","cardType":"basic","points":2,"front":"Where does sales maximisation occur on a cost and revenue diagram?","back":"Where the AR curve meets the AC curve, so the firm earns normal profit.","mcqOptions":[{"text":"Where the AR curve meets the AC curve, so the firm earns normal profit.","correct":true,"explanation":"Sales maximisation seeks the greatest output that does not create a loss. This occurs where average revenue equals average cost, leaving the firm earning normal profit."},{"text":"Where the MR curve meets the MC curve, so the firm earns normal profit.","correct":false,"explanation":"The MC and MR intersection identifies profit maximisation, not sales maximisation. Sales maximisation occurs where AR equals AC, producing normal profit."},{"text":"Where the AR curve meets the MC curve, so the firm earns supernormal profit.","correct":false,"explanation":"AR meeting MC is not the sales-maximisation condition, and it does not necessarily imply supernormal profit. The relevant point is where AR equals AC, giving normal profit."},{"text":"Where the AC curve meets the MC curve, so the firm earns normal profit.","correct":false,"explanation":"The AC and MC intersection identifies the minimum point of average cost, not necessarily the output with zero economic profit. Sales maximisation requires AR to equal AC."}]},{"id":"9ecf7a9c-5156-4293-9b94-a0a32219cfb2","cardType":"basic","points":2,"front":"Why might a firm maximise sales despite earning less profit?","back":"To build market share or deter new entrants.","mcqOptions":[{"text":"To build market share or deter new entrants.","correct":true,"explanation":"High sales can increase a firm's market share and make the market appear difficult to enter. These strategic benefits may justify accepting lower profit in the short run."},{"text":"To reduce market share or attract new entrants.","correct":false,"explanation":"Reducing market share and attracting entrants would weaken the firm's position, not normally motivate sales maximisation. Firms may maximise sales to gain share or deter entrants."},{"text":"To increase unit costs or reduce customer loyalty.","correct":false,"explanation":"Higher costs and weaker loyalty are disadvantages rather than objectives. Maximising sales can instead build market share and strengthen the firm's position against potential entrants."},{"text":"To avoid economies of scale or encourage price competition.","correct":false,"explanation":"Sales growth often helps a firm obtain economies of scale and may make entry harder, so these are not the intended reasons. Market share and entry deterrence are the relevant motives."}]},{"id":"42a35fcb-fa9f-4533-91c9-54a7db2dfa9e","cardType":"basic","points":1,"front":"What does a satisficing firm aim to achieve?","back":"A satisfactory rather than maximum level of profit.","mcqOptions":[{"text":"A satisfactory rather than maximum level of profit.","correct":true,"explanation":"Satisficing means achieving an acceptable level of profit rather than continuing to pursue the absolute maximum. Managers may then balance profit with other stakeholder or personal objectives."},{"text":"A maximum rather than satisfactory level of profit.","correct":false,"explanation":"This reverses the definition. Profit maximisation seeks the highest possible profit, whereas satisficing accepts a satisfactory level that meets the firm's threshold."},{"text":"A minimum rather than satisfactory level of profit.","correct":false,"explanation":"A satisficing firm still needs enough profit to remain viable, so it does not deliberately seek the minimum possible level. It aims for an acceptable, satisfactory profit."},{"text":"A constant rather than satisfactory level of profit.","correct":false,"explanation":"Satisficing is defined by accepting an adequate level, not by keeping profit unchanged. The target is satisfactory profit rather than the maximum attainable profit."}]},{"id":"95568dc8-ab44-4e09-ab63-a1b2e742d016","cardType":"basic","points":2,"front":"Why does satisficing involve balancing stakeholder groups?","back":"Managers respond to competing stakeholder interests instead of optimising one objective.","mcqOptions":[{"text":"Managers respond to competing stakeholder interests instead of optimising one objective.","correct":true,"explanation":"Stakeholders may want different outcomes, such as wages, dividends, employment or environmental performance. Satisficing reflects a compromise that keeps these competing interests sufficiently satisfied."},{"text":"Managers respond to identical stakeholder interests instead of optimising one objective.","correct":false,"explanation":"Stakeholder groups rarely have identical priorities. Their conflicting demands are precisely why managers may compromise and satisfice rather than optimise one single objective."},{"text":"Managers respond to shareholder interests alone instead of optimising one objective.","correct":false,"explanation":"Focusing only on shareholders is closer to a single-objective profit approach. Satisficing involves balancing the competing interests of several stakeholder groups."},{"text":"Managers respond to government interests alone instead of optimising one objective.","correct":false,"explanation":"Government interests may matter through regulation, but they are not the whole basis of satisficing. Managers balance several competing stakeholder interests."}]},{"id":"1886df93-5fae-44ed-8ad6-cc162b66d2e2","cardType":"basic","points":2,"front":"Why must even a satisficing firm earn some profit in the long run?","back":"Profit is needed for survival and to fund investment.","mcqOptions":[{"text":"Profit is needed for survival and to fund investment.","correct":true,"explanation":"Even without maximising profit, a firm needs sufficient profit to cover long-term needs, survive difficult periods and finance investment in capacity, technology or future growth."},{"text":"Profit is needed for advertising and to fund dividends only.","correct":false,"explanation":"Advertising and dividends may use profits, but they do not capture the essential long-run requirement. Some profit is needed for survival and productive investment."},{"text":"Profit is needed for market share and to fund price cuts only.","correct":false,"explanation":"Market share and price cuts can be strategic aims, but they are not the fundamental reason profit is required. Long-run survival and investment require financial resources."},{"text":"Profit is needed for higher wages and to fund tax reductions.","correct":false,"explanation":"Profit may affect wage decisions, but a firm cannot generally use it to fund tax reductions. The essential purposes are maintaining survival and financing investment."}]},{"id":"5ef5e9a9-0f39-4a9c-96be-4ebfda36a671","cardType":"basic","points":3,"front":"Why do many firms still maximise profit in practice?","back":"

Shareholders demand returns.
Competition punishes rising costs.

","mcqOptions":[{"text":"

Shareholders demand returns.
Competition punishes rising costs.

","correct":true,"explanation":"Shareholders expect financial returns, creating pressure for profit. Competitive markets also penalise inefficient cost increases, so firms must control costs and protect profitability."},{"text":"

Managers demand status.
Government rewards rising costs.

","correct":false,"explanation":"Managerial status can encourage alternative objectives, but it does not explain widespread profit maximisation. Competition generally penalises rising costs rather than government rewarding them."},{"text":"

Customers demand dividends.
Competition rewards rising costs.

","correct":false,"explanation":"Dividends are demanded by shareholders, not customers, and competition normally punishes rather than rewards rising costs. These pressures therefore do not support profit maximisation."},{"text":"

Employees demand returns.
Monopoly punishes rising costs.

","correct":false,"explanation":"Shareholders, rather than employees, normally demand investment returns. The relevant cost pressure comes from competition, while monopoly may give firms more ability to pass costs on."}]},{"id":"2ffedb39-98d1-49c4-b7ef-e1a673130d6d","cardType":"basic","points":2,"front":"Why might firms satisfice instead of identifying the profit-maximising output?","back":"They lack perfect cost and revenue data to pinpoint that output.","mcqOptions":[{"text":"They lack perfect cost and revenue data to pinpoint that output.","correct":true,"explanation":"Without complete and accurate information about costs and revenues, managers cannot calculate the precise output where profit is maximised, so they choose a satisfactory achievable outcome instead."},{"text":"They have perfect cost and revenue data that identifies several equally profitable outputs.","correct":false,"explanation":"Perfect information would allow the firm to identify the profit-maximising output. Satisficing occurs because firms lack perfect cost and revenue data, making precise optimisation difficult."},{"text":"They want to produce where average cost is minimised rather than where profit is maximised.","correct":false,"explanation":"Minimising average cost is a possible alternative objective, but it does not explain satisficing. Firms satisfice because they lack perfect cost and revenue data to pinpoint the profit-maximising output."},{"text":"They can identify the profit-maximising output but choose to produce nothing instead.","correct":false,"explanation":"Satisficing means accepting a satisfactory level of profit when the optimum is difficult to calculate. The reason is imperfect cost and revenue data, not a deliberate decision to produce nothing."}]},{"id":"a360fbff-1f25-4971-a9e2-796a5c236c18","cardType":"basic","points":3,"front":"What determines whether a firm pursues profit maximisation or an alternative objective?","back":"

Who controls the firm.
How contestable its market is.

","mcqOptions":[{"text":"

Who controls the firm.
How contestable its market is.

","correct":true,"explanation":"Managers or owners may pursue different objectives depending on who controls the firm, while a highly contestable market increases pressure to prioritise profit and efficiency."},{"text":"

How large the firm is.
How concentrated its market is.

","correct":false,"explanation":"Firm size and market concentration can influence behaviour, but they are not the stated determinants here. The key factors are who controls the firm and how contestable its market is."},{"text":"

Whether costs are fixed.
How elastic its demand is.

","correct":false,"explanation":"Fixed costs and demand elasticity affect profitability and pricing, but they do not directly determine which objective the firm pursues. Control and market contestability are the relevant factors."},{"text":"

Who supplies the firm.
How regulated its market is.

","correct":false,"explanation":"Suppliers and regulation may constrain decisions, but they are not the determinants identified in this explanation. The objective depends on who controls the firm and the contestability of its market."}]},{"id":"fd211eac-9640-491f-ac1d-894233302519","cardType":"cloze","points":null,"front":"Profit maximisation occurs where $\\text{[...]}$.","back":"Profit maximisation occurs where $\\boxed{MC = MR}$.","mcqOptions":[{"text":"$$MC = MR$","correct":true,"explanation":"Profit is maximised at the output where marginal cost equals marginal revenue. Before this point, extra output adds more to revenue than cost; beyond it, extra cost exceeds extra revenue."},{"text":"$$AC = AR$","correct":false,"explanation":"Average cost equalling average revenue indicates normal profit, associated with sales maximisation in this context. Profit maximisation instead occurs where marginal cost equals marginal revenue."},{"text":"$$MC = AR$","correct":false,"explanation":"Equating marginal cost with average revenue confuses marginal and average measures. The profit-maximising output is found where the cost of the next unit equals the revenue from it, so $MC = MR$."},{"text":"$$MR = AC$","correct":false,"explanation":"Marginal revenue equalling average cost is not the profit-maximising condition and mixes marginal and average measures. Profit is maximised where marginal cost equals marginal revenue, $MC = MR$."}]},{"id":"bb81be49-7d6a-43c9-b3f9-4200d3bc9245","cardType":"cloze","points":null,"front":"Revenue maximisation occurs where $\\text{[...]}$, so total revenue is at its peak.","back":"Revenue maximisation occurs where $\\boxed{MR = 0}$, so total revenue is at its peak.","mcqOptions":[{"text":"$$MR = 0$","correct":true,"explanation":"Total revenue reaches its maximum where the additional revenue from selling one more unit is zero. At that point, marginal revenue is zero, so increasing output further reduces total revenue."},{"text":"$$MC = MR$","correct":false,"explanation":"$$MC = MR$ identifies the profit-maximising output, not the revenue-maximising output. Total revenue peaks where the extra revenue from another unit becomes zero, so $MR = 0$."},{"text":"$$AR = AC$","correct":false,"explanation":"$$AR = AC$ indicates normal profit and is linked to sales maximisation here. Revenue maximisation concerns the peak of total revenue, which occurs where $MR = 0$."},{"text":"$$MR = MC = 0$","correct":false,"explanation":"Revenue maximisation requires marginal revenue to be zero, but marginal cost does not also need to be zero. Adding the extra condition incorrectly combines revenue and cost criteria."}]},{"id":"7dd9cca9-641c-40cc-8906-ace0fc6501ff","cardType":"cloze","points":null,"front":"Sales maximisation occurs where $\\text{[...]}$, meaning only normal profit is earned.","back":"Sales maximisation occurs where $\\boxed{AR = AC}$, meaning only normal profit is earned.","mcqOptions":[{"text":"$$AR = AC$","correct":true,"explanation":"Sales maximisation means maximising the quantity sold while making only normal profit. The firm breaks even in economic profit where average revenue equals average cost, $AR = AC$."},{"text":"$$MR = 0$","correct":false,"explanation":"$$MR = 0$ identifies revenue maximisation, where total revenue is at its peak. Sales maximisation instead allows only normal profit, occurring where average revenue equals average cost."},{"text":"$$MC = MR$","correct":false,"explanation":"$$MC = MR$ is the condition for profit maximisation, not sales maximisation. A sales-maximising firm expands output until it earns normal profit, where $AR = AC$."},{"text":"$$AR > AC$","correct":false,"explanation":"If $AR > AC$, the firm earns abnormal profit rather than only normal profit. Sales maximisation in this model occurs at the break-even condition $AR = AC$."}]},{"id":"5ca6733f-672a-42fa-a382-e3dd6117beae","cardType":"cloze","points":null,"front":"A profit-maximising pharmaceutical firm restricts output because beyond the optimum, [ ].","back":"A profit-maximising pharmaceutical firm restricts output because beyond the optimum, marginal cost exceeds marginal revenue.","mcqOptions":[{"text":"marginal cost exceeds marginal revenue","correct":true,"explanation":"Beyond the profit-maximising output, the cost of producing an additional unit is greater than the revenue it generates. Producing more would therefore reduce total profit."},{"text":"marginal revenue exceeds marginal cost","correct":false,"explanation":"When marginal revenue exceeds marginal cost, an extra unit adds to profit, giving the firm an incentive to increase output. Restriction is justified beyond the optimum when marginal cost exceeds marginal revenue."},{"text":"average cost exceeds average revenue","correct":false,"explanation":"Average cost exceeding average revenue indicates a loss on average, but it is not the marginal condition determining whether another unit should be produced. The relevant relationship is marginal cost exceeding marginal revenue."},{"text":"total revenue exceeds total cost","correct":false,"explanation":"Total revenue exceeding total cost means the firm is earning a profit overall, but it does not show whether producing one more unit increases or decreases profit. That depends on marginal cost and marginal revenue."}]},{"id":"8ec79e30-8d2e-4cd2-9917-7a06aaf7f71d","cardType":"cloze","points":null,"front":"On balance, firms may pursue alternative objectives, but some [ ] is needed for long-run survival.","back":"On balance, firms may pursue alternative objectives, but some profit is needed for long-run survival.","mcqOptions":[{"text":"profit","correct":true,"explanation":"A firm can pursue objectives such as growth or sales maximisation, but it must generate some profit over time to fund investment, meet obligations and remain in business."},{"text":"revenue","correct":false,"explanation":"Revenue is the money received from sales, but it does not account for production costs and therefore may coexist with losses. Long-run survival requires some profit, not merely revenue."},{"text":"market share","correct":false,"explanation":"Market share can support growth and competitive objectives, but gaining it may require prices or costs that produce losses. Some profit is needed for long-run survival."},{"text":"consumer surplus","correct":false,"explanation":"Consumer surplus is the benefit consumers receive when they pay less than their willingness to pay; it is not the firm's financial return. Firms need some profit to survive long term."}]}]}],"examCountdown":{"examDate":"2027-05-10","paperLabel":"Paper 1"},"heading":"3.2.1 Business objectives","title":"3.2.1 Business objectives Flashcards","topbar":{"backHref":"/a-level/economics/edexcel/a/flashcards"},"topicSidebar":"$L38"}]}],"topicId":"236ff180-cabd-55ac-b1c3-f0094ee910cd","walled":"$L39"}],"$L3a","$L3b"]