Lesson 4.1.5.2

4.1.5.2 The objectives of firms Quiz: AQA Economics, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.1.5.2, The objectives of firms: 20 multiple choice questions for the AQA Economics (7136), Unit 1: Individuals, firms, markets and market failure, written with Revision Ninja.

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The 20 questions

  1. The traditional theory of the firm assumes that firms aim to:

    • Maximise market share
    • Maximise profits
    • Maximise sales revenue
    • Maximise employment

  2. The profit-maximising rule is:

    • AC = AR
    • MC = MR
    • MC = AC
    • MR = AR

  3. The divorce of ownership from control means that:

    • Owners sell the firm to the government at a fixed price
    • Firms no longer have to report their profits to anyone
    • Shareholders own the firm, but managers make day-to-day decisions that may differ from owners' profit goals
    • Managers own the firm, while shareholders decide prices and output in every market

  4. The satisficing principle suggests that managers:

    • Maximise profit only in the short run and ignore the long run, cutting investment in every period so that profit is high now
    • Aim for an acceptable level of profit or other goals rather than the maximum possible
    • Set output at the level where average cost is minimised in every period
    • Ignore all objectives other than sales growth, and set price and output only to increase the number of units sold each year

  5. Which is an alternative objective a firm may pursue?

    • Charging a price below marginal cost permanently
    • Minimising the number of employees to cut all costs
    • Avoiding any contact with customers and suppliers
    • Growth through increasing its market share

  6. A firm's marginal revenue is £9 and its marginal cost is £11 at its current output. To maximise profit it should:

    • Raise its price, since marginal cost exceeds marginal revenue at all outputs
    • Reduce output, since the last unit costs more to make than it brings in
    • Increase output, since marginal revenue is below marginal cost
    • Keep output unchanged, since marginal revenue equals average revenue

  7. A firm's marginal revenue and marginal cost are both £15 at its current output. This means:

    • Profit cannot be determined without knowing fixed costs
    • The firm should cut output until marginal cost is zero
    • The firm should increase output until marginal revenue is zero
    • The firm is at the profit-maximising output

  8. Why might a sales-maximising firm produce more output than a profit-maximising firm?

    • It minimises average fixed costs at its sales-maximising output, so that it spreads its overheads across as many units as possible
    • It aims to produce where marginal cost is zero
    • It aims to sell where marginal revenue is zero, which is at a higher output than the profit-maximising level
    • It always charges a lower price than its profit-maximising rival, so its prices are below those of the profit maximiser in every period

  9. Which is a consequence of the divorce of ownership from control?

    • Firms automatically become price takers in every market
    • The firm is certain to leave the market within a year
    • Shareholders always receive the maximum possible dividend from the firm
    • Managers may pursue growth or security rather than profit, so performance may fall short of profit maximisation

  10. Quality as a firm objective is best described as:

    • Reducing product quality in every period to cut costs
    • Guaranteeing an identical specification in all markets
    • Avoiding any investment in product improvements, since the firm prefers to keep its existing product unchanged for as long as possible
    • Improving the product or service, which can build loyalty and support higher prices

  11. A firm sets a price that gives it 'enough' profit and then stops searching for more. This is best explained by:

    • Divorce of ownership from control
    • Profit maximisation
    • Price discrimination between consumer groups
    • Satisficing

  12. Which evaluative point suggests that profit maximisation may not describe real firm behaviour well?

    • Profit maximisation may not describe real firm behaviour well because it ignores the costs of collecting data and so is never measured
    • Firms never know their costs
    • Managers always have perfect information about demand and so never make mistakes, which means profit is always at its maximum level
    • Managers have limited information and other goals, so firms may satisfice rather than optimise

  13. A firm wants to increase its market share. Which action is most consistent with this aim?

    • Cutting prices or increasing advertising to attract customers from rivals
    • Raising prices sharply to reduce customer numbers
    • Reducing output to limit total sales, which lowers the number of units the firm must produce and so reduces the risk of unsold stock
    • Ignoring rival firms' prices altogether

  14. Total revenue is £120,000 at output 1,000 and £130,000 at output 1,100. The marginal revenue of the extra 100 units is:

    • £1,200 per unit
    • £100 per unit
    • £10 per unit
    • £130 per unit

  15. A manager's bonus is linked to sales revenue rather than profit. This may cause the firm to:

    • Maximise average profit per unit sold
    • Fix its price at the level of marginal cost, so that every unit sold just covers its direct cost and no margin is kept by the firm
    • Minimise total costs at all times, which means that the firm cuts output and staff as far as it can in every period of the year
    • Produce more output and charge a lower price than a profit maximiser would

  16. Why might a firm pursue survival as its main objective?

    • In uncertain or competitive conditions, staying in business may matter more than maximising short-run profit
    • Firms prefer to close when they are profitable
    • Survival is only relevant to public-sector organisations
    • Survival always means maximising profit in the next year

  17. Which statement about satisficing and profit maximisation is true?

    • Both imply the same level of output by definition
    • Profit maximising requires no information about demand
    • Satisficing always implies lower costs than profit maximising
    • Satisficing aims for a satisfactory target, whereas profit maximising aims for the highest possible profit

  18. Why might managers prefer growth to profit maximisation?

    • Growth can raise managers' salaries, status and job security, but it always reduces the risk of takeover by shareholders in every case
    • Growth can raise managers' salaries, status and job security
    • Growth always reduces the risk of takeover to zero, so managers who pursue growth never have to worry about losing control of the firm
    • Growth is only possible with a government licence

  19. Which combination is most consistent with a firm aiming for market share growth?

    • Reduced output and higher average costs
    • Exit from the market in order to maximise profit
    • A higher price and lower advertising spending
    • A lower price and higher advertising spending

  20. Why might a firm's objectives conflict with the interests of consumers?

    • A profit-focused firm may restrict output and charge higher prices, whereas consumers want low prices and high quality
    • Consumers prefer firms that maximise sales revenue rather than profit
    • Firm objectives never affect the prices consumers pay
    • Consumers always benefit when firms maximise profit

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