S13

(b) seeking to earn as much profit as possible (1)

profit is the difference between total revenue and total cost (1)
profit maximisation is where there is the greatest difference between TR and TC (2)
high profits can be used for reinvestment (1)
high profits can be used to pay high dividends (1)
may be achieved by lowering costs with an example (1)
may be achieved by raising revenue with an example (1) (note reference to increasing price is
not sufficient)
MC=MR (although this is not explicitly on the syllabus) (2)
(c) sales revenue maximisation
growth of firm/increase in market share
satisficing
improvement of reputation/brand loyalty
ethical/environmental considerations/idea of corporate social responsibility
survival
Internal diseconomies of scale:
ineffective management as management becomes more complex
firm could become slower in responding to changes in market conditions
communication problems
poor industrial relations
motivation problems
External diseconomies of scale:
congestion/increased journey times
increased competition for resources, putting up price of labour
Up to 4 marks for a discussion of diseconomies of scale.

Up to 2 marks for discussion of extent e (a)

S12
able to sell shares on stock exchange
without needing permission of existing shareholders
this would enable it to raise considerably more finance
which could be used to finance expansion.

[4]

(b) Consideration of profit maximisation:

it is where the difference between total revenue and total cost is greatest/ (MC=MR) but this is
not in the
syllabus)
profit is necessary for survival
this is the underlying assumption of firms, although there may be other goals
used to finance investment/expansion
used to finance research and development used to reward shareholders/senior management.

S09
(d) Need to discuss the relative demand for labour with and without the
automation.

If labour is need to drive automation, The value/number of some labour may increase if they
need to operate specialist machines, demand for labour increase, and the hours and wages of
these workers may change as the union would like.
However, for most workers, the unions may be able to negotiate about shorter hours, but it is
unlikely that they will achieve this together with higher pay. This is because business is profit
motivated, it is unlikely managers will pay higher wages for shorter working hour.
If labour is not needed to drive automation, demand for labour will decrease. Managers will
allow shorter working hours. But, it is unlikely that they will achieve higher wages.