7.8 Differing objectives and policies of firms

Evaluate the consequences for the price and output of a firm if it changes its objective from profit maximisation to sales maximisation as a response to the principal-agent problem. [20]

b) Discuss the extent to which a firm's ability to operate a policy of price discrimination is determined by the market structure in which that firm operates. [13]

Limit pricing may sometimes be used by a monopoly. It creates a barrier to entry which benefits consumers in the short run but increases costs to the consumer in the long run.

b) Discuss this statement. [13]

b) Discuss the significance of economies of scale for the survival of firms. [13]

b) Discuss whether consumers or producers benefit more from the practice of price discrimination. [13]

a) What costs ought a profit-maximising firm take into consideration when making decisions about price and output? [12]

b) 'Price discrimination is always possible but never desirable.' Do you agree with this opinion? [13]