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# Profit maximisation is assumed to be the business objective of most firms. Assess whether this is the case for coffee shop owners.
- URL: https://www.a-level-economics-tutor.com/profit-maximisation-is-assumed-to-be-the-business-objective-of-most-firms-assess-whether-this-is-the-case-for-coffee-shop-owners/
- Published: 2026-08-01T19:00:14.000Z
- Updated: 2026-08-01T19:00:14.000Z
- Author: Jaisul Naik
- Tags: Edexcel 10 mark question

### [Edexcel A-Level Economics Paper 1 June 2022 Extract](https://www.tootingtutors.co.uk/content/files/2025/10/INSERT---June-2022-Paper-1.pdf?ref=a-level-economics-tutor.com)

**Profit maximisation is assumed to be the business objective of most firms.** 

**With reference to Extract A, assess whether this is the case for coffee shop owners. (10 marks)**

1. Profit maximisation occurs when firms produce at the output where marginal costs = marginal revenue.
2. Coca Cola have stated that they have the aim of 'maximising long term returns to shareholders'.
3. Additionally, coffee shops are part of an oligopoly market which means they can focus on profit maximising rather than survival, as there are only a few firms dominating the market.
4. Costa is the market leader, with 2681 shops in the UK in 2021.
5. Most coffee shop owners are likely to be operating at this point where MC=MR.
6. At any point below this, firms can increase output and make more total profit because marginal revenue exceeds marginal cost.
7. At any point after this, increasing output leads to a fall in total profit since marginal costs exceed marginal revenue.
8. Therefore, it is likely that coffee shops like Costa operate in a way that allows them to maximise their profits.
9. This allows them to reinvest more and also allows shareholders to earn the most dividends.
1. However, firms might not prioritise maximum profits over other factors such as the customer experience.
2. Line 8 mentions that customers value 'coffee quality'.
3. In an oligopoly firms know that they are unable to set prices as high prices leads to a loss of market share and low prices leads to a price war.
4. Therefore, firms in an oligopoly often focus on non-price competition.
5. Managers are likely to be aware of this, which leads to profit satisficing.
6. Firms might sacrifice profits in order to meet other targets like maximising sales and increasing their customer base and customer loyalty.

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