"An Objective of Firms Is to Maximize Profits

question 68

Multiple Choice

"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.

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Definitions:

Marginal Utility

The additional satisfaction or benefit gained from consuming one more unit of a good or service.

Pretzels

A type of baked pastry made from dough that is commonly shaped into a knot and often salted.

Budget Constraint

A representation of all the combinations of goods and services that a consumer can afford with a fixed income and prices.

Indifference Curve

A graph representing different bundles of goods between which a consumer is indifferent, showing combinations that give the consumer the same level of satisfaction.