Summary

Most businesses main objective is that of profit maximisation

Businesses also pursue additional aims and these may be satisficing rather than maximising

Divorce of Ownership and Control means that the owner of the business does not run it

Law of Diminishing Returns states that as more inputs are added to production output will initially rise and then it will fall

Marginal costs and revenues look at the impact of each unit on total costs / total revenue

Costs measure all expenses of a business and can either stay the same with output (fixed) or vary with output (variable)

Economies of scale occur when a business is able to reduce the average cost per unit as it increases in size

Technological change and innovation is able to reduce costs and increase efficiency in the long run

Revenue measures the amount of money coming into a business, average and marginal revenues decline as production increases

Profit is the payment for enterprise

Normal profits are the minimum level of profit needed for a firm to stay in a market