Sales Maximisation

Sales Maximisation

This is the highest level of sales a firm can achieve before making success. 

Why do firms sales maximise?

1. To survive 

2. Create brand loyalty 

3. Increase market share

4. Eradicate competition

What does the diagram look like?

Why AC=AR?

1. When AC=AR normal profit is achieved. The maximum output is achieved before losses are made because AC>AR.

2. When AR>AC there is still profit to be made by increasing sales.

Recap Question

1. Give four reasons why firms may sales maximise?

2. At what point is does sales maximisation occur?

3. What type of profit is achieved at sales maximisation point?

4. Why do firms make losses after the sales maximisation point?

** 5. At what point in a firm’s life cycle do you think sales maximisation would be an objective?

Answers?

1. (i) to survive (ii) create brand loyalty (iii) increase market share (iv) eradicate competiton

2. AC=AR

3. Normal Profit

4. Because AC>AR 

5. Early on

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