The Profit-Maximization Assumption of Economic Theory Does Not Fit Reality

question 80

Multiple Choice

The profit-maximization assumption of economic theory does not fit reality because:

• A) all real firms want to maximize long-term profits rather than short-run profits.
• B) all real firms want to maximize their share of the market.
• C) real-world firms have a single goal, but this goal has nothing to do with profits.
• D) real-world firms have many goals, which depend on the incentive structure incorporated into the firm's organization.

Understand how price elasticity influences revenue strategies in response to changes in demand.

Understand different market entry strategies for international business expansion.

Identify and analyze the advantages and disadvantages of various international market entry options.

Assess the impact of financial resources and risk tolerance on the selection of market entry strategies.

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Definitions:

Growth

The process of increasing in size, number, value, or strength.

Safety

The condition of being protected from or unlikely to cause danger, risk, or injury.

Suggest Changes

The act of proposing adjustments or modifications to ideas, processes, or behaviors to improve or resolve a situation.

Hierarchy of Needs

A psychological theory proposed by Abraham Maslow that is often depicted as a pyramid with physiological needs at the base, ascending through safety, love/belonging, esteem, to self-actualization at the top.