When firms are faced with making strategic choices in order 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 behavior of firms when making strategic choices to maximize profit. This is because game theory takes into account the interdependence of firms' decisions and the potential for both cooperative and non-cooperative behavior. By analyzing the various possible outcomes and strategies of different firms, game theory can provide insight into how firms may behave in different market conditions.

When Firms Are Faced with Making Strategic Choices in Order