"An objective of firms is to maximize profits." This statement
A)is a normative statement and thus cannot be tested.
B)applies only to corporations.
C)is an assumption used by economists to predict the behaviour of firms.
D)is an unrealistic assumption,and therefore of little use to economists.
E)has been proven by empirical testing to be always true.

Question

Quizplus · Accepted Answer

The statement reflects the basic assumption used by economists to understand the behavior of firms. While not all firms may prioritize profit maximization, this assumption allows for useful predictions and understanding of business behavior.

"An Objective of Firms Is to Maximize Profits