Firms, costs, revenues, and objectives

Total cost

The amount of money required to change the factors of production into a product. The average total cost is the total amount of money required divided by the quantity produced. Fixed costs are those that do not vary as the output produced by a company varies. For Example, interest in previously taken loans.

Average Fixed Cost is the total fixed cost divided by the output produced. This and the different types of variable costs helps to calculate whether the business is enjoying economies or diseconomies of scale.  

Variable costs are that do vary as the output produced by a company varies. Average Variable Cost is the total variable cost divided by the output produced. In an increase in output for the short run, average variable costs decrease and then increase. The total variable cost usually increases quickly at first and then began to decline after some time.


The amount made by a firm be selling its products. Total Revenue is the total amount of money made by a firm by selling its products (or acquiring sales). Average Revenue is the total revenue divided by the quantity produced and is the same as the price. This is usually then reduced to smaller amounts due to other expenses and then comes added with other types of income to get the profit of the business

Long Run

The long run is the time period where all the factors of production can be changed and all the costs are variable and are usually of longer time periods greater than 1 year


The amount of money that has to be given to obtain a certain product

                                                     Objective of firms


At the initial stage, any company’s primary objective should be to survive in what may be a competitive market. It could also become an objective when the firm is experiencing a slump etc. Firms should be content in making enough profit and revenue to cover their costs before they become well known or be just trying to survive the bad period so that the owners and workers still have a source of revenue after the bad times have passed.


Growth is an essential objective for any firm. The growth of a firm allows it to take various advantages of internal economies of scale. For Example, firms can take advantage of buying economies of scale and purchase raw materials required for the production of their good at a discounted price.

Growth of the firm may also be essential for the people working if they want to increase their profits, increase the prestige feel that their job is safer (usually larger the business the safer the jobs), and others. Growth could help the firms enjoy economies of scale but too much growth could lead to diseconomies of scald causing a loss in revenue due to an increase in average expenses

It could be attained simply by expanding operations or products or through the different types of mergers.

Social welfare

Social welfare is usually the objective of these firms that call themselves social enterprises.  They may also be a focus of state-owned enterprises. They usually try to make sure the world has been improved in some sort of fashion either through the environment or through society.

Profit satisficing

This means that a firm might have to sacrifice an objective to make sure that they could make sure they can fulfill other objectives too. For example, a firm might decide to make sure that they could improve their asset, etc. while reducing some of their dividends and profits for sometime

Profit Maximization

This would mean to do anything to achieve maximum profit levels that are usually in the short terms but could extend into operations that may be expensive t first but may allow profit in the long term

How to increase profit

Reduce the costs by trying for economies of scale, reducing wastage, and try to bring new technologies that may improve the efficiency of production and more. You also could increase the marked-up value to increase the profit per unit sold. There are other methods.