A Level Economics AQA Practice Exam

What does sales maximisation involve?

1. Producing where average cost equals average revenue

2. Maximising product variety

3. Selling at the highest price possible

4. Allocating more resources for marketing

The correct answer is: Producing where average cost equals average revenue

Sales maximisation refers to a business strategy aimed at maximizing the volume of sales rather than profits. This concept is typically applied in the context of firms seeking to increase their market share or achieve a certain sales target. The correct approach to achieving sales maximisation involves producing where average revenue equals average cost. When a company produces at this point, it indicates that it is selling each product at a price that covers its costs. This maximises the number of units sold since lowering prices to attract more customers can lead to higher sales volume, even if total profits are not maximized. Thus, the focus is on increasing sales quantity until sales revenue matches total costs, allowing the firm to operate at full capacity and meet customer demand. This method contrasts with strategies such as maximizing product variety, selling at the highest price, or allocating more resources for marketing, which may not directly correlate with the goal of boosting the volume of sales or ensuring every unit produced contributes to the overall sales maximisation objective.