There
are many factors influencing a firm in
deciding their objectives. They are;
1)
Market structure (number of competitors),
2)
Activities of competitors,
3)
Relative power of different groups within the firm,
4)
Views of potential consumers,
5)
Legal restraints for implementation,
6)
Sector in which the firm operate.
The
firm in the imperfect competition may choose a number of objectives as
given below and choose an appropriate output positions to achieve their
respective goal.
1)
Profit maximisation: - Firms
seeks to maximise profit where MC= MR. Monopolists earn super-normal profit in
long run because of the barriers to entry.
2)
Sales maximisation:- Monopolists
seeks to maximise sales revenue by MR = 0, where the total revenue
is at its peak. Directors of companies prefer in order to increase their
salaries, and make it more difficult for another firm to take over the company.
3)
Normal profit: - State owned
monopolies prefer to run at break even, which is at normal profits, where
average cost equals average revenue.
4)
Optimum output: - Some state
owned monopolies prefer to achieve productive efficiency by producing at the
optimum output. They operate at minimum average cost output where marginal cost
equals average cost.
5)
Socially optimum output: -
[Allocation-efficient output] It is achieved where price (average revenue) is
equal to marginal cost.
6)
Predatory pricing output: - Firm
set its price with the objective of driving a competitor out of the market or
discouraging potential rivals from entering the market. They keep rice
above the normal profit level but below the maximum profit
level.
Back
to Home Page Click here