5.2 The Objective of Firms
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Last updated 1:25 PM on 9/30/25
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5 Terms
1
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What does the 'divorce of ownership from control' refer to?
The separation between a firm's owners (shareholders) and its managers, which may lead to differing objectives.
2
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List alternative objectives firms might pursue.
Survival, growth, quality improvement, sales revenue maximization, and market share increase.
3
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What is the traditional assumption about a firm's objective?
Firms aim to maximize profits.
4
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What is the satisfying principle?
Managers aim for satisfactory rather than maximum profits to meet various stakeholder objectives.
5
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What is the profit-maximising rule?
Marginal Cost (MC) = Marginal Revenue (MR).
Note 
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