Reflection – What I have learned about the “explain” question

In my most recent summative examination in IB HL Economics, I feel I have failed to effectively elaborate upon the question. In explaining the differences between profit maximization and sales revenue maximization, I missed the explanation between the two ideas as goals of a firm. An example of this is that while it may seem most sensible for a firm to maximize it’s profit, a goal aiming at long run production increase could choose to increase it’s sales revenue in order to lower cost, exploiting an economy of scale and marginal return increase. This is represented on a normal cost curve diagram as the cost of the product shifts downward along the AC curve. As well as this sales revenue maximization is a goal of the firm in increasing market shares, as lowering cost will result in the firm being able to gain more customer loyalty and temporarily boost sales. This idea as a goal of a firm is especially important in a monopolistic competition style market, where consumer loyalty and lowering prices is important in controlling market shares.