When firms are faced with making strategic choices to maximize profit, economists typically use
A)the theory of monopoly to model their behavior.
B)the theory of aggressive competition to model their behavior.
C)game theory to model their behavior.
D)cartel theory to model their behavior.

Question

Quizplus · Accepted Answer

Game theory is commonly used by economists to model the strategic choices of firms. It provides a framework to analyze and predict the behavior of competitors in various market situations, such as pricing and output decisions. This allows firms to make informed decisions on how to maximize their profit while considering the actions of competitors. The other options (A, B, D) are not as widely applicable in modeling strategic choices of firms.

When Firms Are Faced with Making Strategic Choices to Maximize