How will price, output, and profit compare if firms maximize sales rather than profit?
A firm maximizing sales will operate where MR = 0, not MR = MC. Since MC > 0, MR = MC occurs at a lower output level than MR = 0 . Sales-maximizing firms will sell a larger output. Since demand slopes down, sales-maximizing firms must charge less than their profit-maximizing counterparts. Finally, sales-maximizing firms go beyond the profit-maximizing point. They are willing to accept lower profits in return for larger sales.
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Refer to Figure 2-7. Suppose worker productivity increases so that the total number of vehicles produced increases as the company adds more machinery, workers, and changes the layout of the factory. This is best represented by the
A) movement from H to J in Graph B. B) movement from G to H in Graph B. C) movement from K to L in Graph C. D) movement from E to F in Graph A.
Which of the following statements is true about optimal two-part tariff and perfect price discrimination for a given demand curve?
A) The total revenue received under an optimal two-part tariff could be greater than, less than, or equal to that received under perfect price discrimination, depending on the fixed-fee portion of the two-part tariff. B) The total revenue received under the two pricing schedules is the same. C) The total revenue received under an optimal two-part tariff is less than that received under perfect price discrimination. D) The total revenue received under an optimal two-part tariff exceeds that received under perfect price discrimination.