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 many goals, which depend on the incentive structure incorporated into the firm's organization.
D. real-world firms have a single goal, but this goal has nothing to do with profits.
Answer: C
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Use the following graph to answer the next question.
If the industry operates as a pure monopoly, the profit-maximizing quantity of output would be ________.
A. a level that is not labeled in the graph B. 195 C. 160 D. 90
The price elasticity of demand measures which of the following?
A) the slope of the demand curve B) the rate at which demand changes when price changes C) how responsive the quantity demanded is to changes in price D) the percentage-slope of the demand curve E) None of these correctly defines what price elasticity of demand measures.
A supply curve shows the marginal
A) benefit consumers receive from consuming a good. B) profit businesses earn from selling a good. C) cost of producing the good. D) price paid for a good. E) benefit sellers receive from selling a good.
A decrease in foreign income ________ exports of U.S.-made goods, so aggregate demand ________ and the aggregate demand curve shifts ________
A) increases; increases; rightward B) decreases; decreases; leftward C) decreases; increases; rightward D) increases; increases; leftward E) decreases; decreases; rightward