Lesson 3.1.2

3.1.2 Non-maximising objectives and the principal-agent problem Quiz: OCR Economics, Unit 3

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 3.1.2, Non-maximising objectives and the principal-agent problem: 20 multiple choice questions for the OCR Economics (H460), Unit 3: Business objectives, written with Revision Ninja.

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The 20 questions

  1. At what point does a firm achieve profit maximisation?

    • TR equals TC
    • MR equals MC
    • AR equals AC
    • MR equals zero

  2. What is the condition required for revenue maximisation?

    • MC equals zero
    • MR equals MC
    • MR equals zero
    • AR equals AC

  3. What output condition applies when a firm aims to maximise sales volume without making a loss?

    • AR equals AC
    • MC equals AC
    • MR equals MC
    • MR equals zero

  4. Which term describes making sufficient profit to satisfy shareholders rather than fully maximising profits?

    • Utility maximisation
    • Profit maximisation
    • Satisficing
    • Revenue maximisation

  5. In the principal-agent problem within a public limited company, who represents the principal?

    • Managers
    • Employees
    • Board of directors
    • Shareholders

  6. In corporate governance, who acts as the agent delegated to run daily business operations?

    • Managers
    • Shareholders
    • Consumers
    • Suppliers

  7. What primary cause gives rise to the principal-agent problem between owners and managers?

    • Information asymmetry
    • Market failure
    • Moral hazard
    • Economies of scale

  8. Which executive incentive is specifically designed to reduce the principal-agent problem?

    • Share options
    • Hourly wages
    • Redundancy pay
    • Fixed salary

  9. How does output under sales maximisation compare with output under profit maximisation?

    • Output is lower
    • Output is higher
    • Output is identical
    • Output is zero

  10. Compared to profit maximisation, how does revenue maximisation affect the selling price of a product?

    • Price is higher
    • Price is infinite
    • Price is lower
    • Price is identical

  11. A firm sets a 5% profit target to satisfy owners while pursuing staff welfare. What objective is this?

    • Sales maximisation
    • Profit maximisation
    • Satisficing
    • Cost minimisation

  12. A firm produces output where marginal revenue is £12 and marginal cost is £8. To maximise profit, it should:

    • Decrease output
    • Keep output constant
    • Increase output
    • Shut down production

  13. If a firm produces an output level where marginal revenue is -£3, what should it do to maximise revenue?

    • Reduce output
    • Lower average cost
    • Keep output constant
    • Increase output

  14. Directors wish to retain profits for expansion while shareholders demand higher dividend payouts. What does this illustrate?

    • Productive efficiency
    • Stakeholder conflict
    • Market efficiency
    • Vertical integration

  15. What market force limits managers from pursuing non-maximising objectives at the extreme expense of profits?

    • Takeover threat
    • Price discrimination
    • Collusion risk
    • Monopoly power

  16. According to managerial utility models, what primary objective do managers often seek to maximise?

    • Dividend payments
    • Consumer surplus
    • Social welfare
    • Fringe benefits

  17. Adoption of ethical sourcing targets leading to higher production costs moves a firm away from which objective?

    • Sales maximisation
    • Profit maximisation
    • Growth maximisation
    • Satisficing

  18. In corporate growth models, what key constraint restricts a manager's pursuit of rapid growth?

    • Perfect competition
    • Zero marginal cost
    • Maximum revenue
    • Minimum profit level

  19. A firm undercuts rivals by pricing where AR = AC to gain market share. What strategy is this?

    • Profit maximisation
    • Sales maximisation
    • Revenue maximisation
    • Satisficing

  20. The principal-agent problem frequently leads to organisational slack and inefficiency. What type of inefficiency is this?

    • Dynamic inefficiency
    • Scale inefficiency
    • X-inefficiency
    • Allocative inefficiency

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