The theory of the firm is based on the following two key assumptions:
a) Firms seek to maximize profits, and the firm is a single, consistent decision-making unit.
b) Firms seek to become as large as possible, and they seek to maximize total revenue.
c) Firms seek to maximize revenues, and to maximize undistributed profits.
d) Each firm has a highly diversified product, and this leads to profit maximization.
e) Firms seek to maximize profit, and to distribute the maximum value in dividends.
Ans: a) Firms seek to maximize profits, and the firm is a single, consistent decision-making unit.
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