The Theory of the Firm Is Based on the Following

question 57

Multiple Choice

The theory of the firm is based on the following two key assumptions:

• A) Each firm has a highly diversified product, and this leads to profit maximization.
• B) Firms seek to maximize profit, and to distribute the maximum value in dividends.
• C) Firms seek to maximize revenues, and to maximize undistributed profits.
• D) Firms seek to maximize profits, and the firm is a single, consistent decision- making unit.
• E) Firms seek to become as large as possible, and they seek to maximize total revenue.

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Definitions:

Unemployment

The state of being without a job despite actively looking for work, measured as a percentage of the labor force.

Normative Economics

Normative economics deals with the evaluation of economic outcomes through the prism of what ought to be, recommending actions by what is deemed desirable or ideal.

Macroeconomics

The branch of economics that studies overall economic dynamics, including inflation, unemployment, and economic growth, on a national or global scale.

Rate of Unemployment

The proportion of people in the labor force who are unemployed and actively seeking work.