What term describes the objective of a firm in a competitive market?

In a competitive market, the primary objective of a firm is profit maximization. This means that firms aim to determine the level of output where their total revenues exceed their total costs by the largest amount. Profit maximization occurs at the output level where marginal cost equals marginal revenue; this is where the cost of producing one additional unit is exactly equal to the revenue generated from selling that unit.

While revenue maximization and cost minimization are important considerations for firms, they are generally means toward the ultimate end of maximizing profit. Revenue maximization focuses solely on increasing total sales without considering costs, which does not guarantee profitability. Cost minimization is about reducing expenses but does not ensure that the revenue generated will exceed those costs adequately. Increasing market share can be a strategy to boost long-term profitability but is not the primary objective in a competitive environment.

Thus, profit maximization most accurately reflects the goal firms strive to achieve in a competitive market scenario.