The Idea That Firms Pursue Actions to Maximize Profits Is

question 17

Multiple Choice

The idea that firms pursue actions to maximize profits is:

• A) generally rejected by economists in favor of the idea that firms maximize revenues.
• B) a reasonable assumption, because firms that do not maximize profits will see their market share drain away to their profit-maximizing rivals.
• C) easier to accomplish when management has little oversight from shareholders and boards of directors.
• D) refuted by evidence that firms engage in goodwill advertising and other charitable activities.

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Definitions:

Predictability

The degree to which future events or behaviors can be forecasted based on past patterns or data, indicating a level of certainty or expectation.

Loose Culture

A type of organizational culture that is flexible, adaptable, and less governed by strict rules and procedures, often encouraging creativity and innovation.

Social Norms

The accepted behaviors or rules within a society or group that guide actions and expectations without the need for formal laws.

Ecological Fallacy

The error of assuming that a characteristic of an individual can be inferred from the characteristics of the group to which they belong.