An Analysis of a Firm in a Competitive Environment

An Analysis of a Firm in a Competitive Environment

Document details
Category: Business Studies Essay
Subcategory: Management
Words: 1019
Pages: 2

If firms were not in a competitive environment, they would be able to control the market. Still, there are other factors, which stop firms from controlling the market. Namely the fact that firms do not have perfect information, issues about its objectives or firms may not even know how to maximise profits. This is due to the fact that companies use different pieces of information or interpret it differently. Firms can use different tasks in order to achieve the same aim. Companies often set themselves in mission statement or they try to set goals by which the statement will be achieved or a specific objective. A firm aims to maximise profits, and that is what this essay will focus on. First, it will give a brief definition of firm and define its objectives. Second, it will examine the assumption of profit maximisation. Third it will confirm whether firms really maximise their profits. Then it will follow by mentioning other alternatives to profit maximisation. Finally in the conclusion, it will include the results of this essay. It is understood by firm an organisation consisting of one or more individuals working as a decision-making unit to produce goods or services (Atkinson, B. R. Miller Business Economics). The firms objectives are to maximise profits. The amount that the company receives for the sale of its output is called its total revenue. The amount that the firm pays to buy inputs is called its total cost. We, then, define profit as a firms total revenue minus its total cost. P TR - TC Thus, if a firm gets 10,000 from selling its output and spends 90,000 producing this output, its profit is 10,000. The above diagram shows how costs, revenue and profit interact with each other. Costs go up with output as well as revenue, but just till a certain point. Revenue...

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