More revenue for production

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cost is incurred in services the total of cost one total variable costs a variable cost is a cost which varies directly with outputs hue to total fixed costs don't vary with level of output example interest on loans to invest in capital total costs is therefore equals to fixed costs plus total variable costs one average costs the average cost is the cost of production for each unit of a good it is also known as the unit cost average cost is equal to total cost divided by outputs Q total revenue is equal to price per unit multiplied by quantity of goods average revenue average revenue per unit of output is equals to the total revenue divided by the output breakeven where total revenue is equal to total cost as seen in point a of the diagram then the firm neither makes a profit or suffer a money loss we call this breakeven profit maximization profit maximization is the objective of all firms the reasons for profit maximization are as follows one higher dividends for shareholders two more profit can be used to finance research and development three higher profit makes the firm less vulnerable to takeover for higher profit enables higher salaries for workers sometimes firm may have other objectives other than profit maximization sales maximization may be another objective of firms the reason for sales maximization is that increased sales can increase market share thereby increasing monopoly power monopoly power can enable the firm to up prices and make more profits in the long run managers prefer to sale maximizes greater sales leads to greater rewards and ultimately greater income for them growth maximization this is similar to sales maximization and may involve mergers and takeovers with this objective the firm may be willing to make lower levels of profit in order to increase in size and gain more market share more market share increases their monopoly power and ability to be a price setter long-run profit maximization profit satisficing in some cases firms may sacrifice profits in the short term to increase profits in the long run for example by investing heavily in new capacity or in training its staff to increase productivity firms may make a loss in the short run but enable higher profits in the future so Lauren concerns some firms may adopt environmental concerns as part of its effort to create a good name or brand for the firm this can ultimately help profitability as the brand becomes more attractive to consumers some firms may adopt social or environmental concerns on principle alone even if it does little to improve sales or the brand image cooperatives a cooperative is not like a normal firm it is run to maximize the welfare of all stakeholders like workers in agricultural farming any profit the co-operative made will be shared amongst all members you