Final answer:
The term used to describe an approach that measures management's ability to maximize earnings above a targeted level is profit maximization.
Step-by-step explanation:
The term used to describe an approach that measures management's ability to maximize earnings above a targeted level is profit maximization.
Profit maximization is the goal of many businesses, where they aim to achieve the highest possible profit by maximizing revenue and minimizing costs.
This approach involves analyzing factors such as marginal revenue and marginal costs to determine the level of output that will result in the greatest profit.
For example, a business might use marginal revenue and marginal cost analysis to determine the optimal quantity to produce and sell, where the difference between revenue and cost is the highest. By doing so, management can effectively measure their ability to maximize earnings above a targeted level.