Total revenue price quantity mc r t rr rr r rr rr r

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Unformatted text preview: easure of cost you select) is not the same as profit maximization. • Key point: Quantity decisions cannot be delegated to a cost center. Total Revenue = Price ∗ Quantity MC r $T rr rr r rr rr r rr rr r rr rr r rr r rr • Graph of firm’s inverse demand curve M&S 452 — Strat and Org c 2008 Scott Schaefer rr r rr rr r rr rr rr r rr rr r rr r rr r Q E 14 • Suppose the firm asks the division to maximize revenue? What price will the division prefer? • Suppose • Let’s think about a Functional Form organization that makes its marketing division a revenue center. d Mfg. Division Head d ‚ d Mfg. Head Product B CEO Mkt. Head Product A Mkt. Division Head © Mkt. Head Product B This division knows the firm’s MR. No one has all the information needed to set MR = MC. d d Mfg. Head Product A d This division knows the firm’s MC. • Recall the Functional Form M&S 452 — Strat and Org c 2008 Scott Schaefer 16 • CoOA Application: Because of the limitations of “revenue” as a perf...
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