The activities of consumers and firms:

Question

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Economic theory recognizes that the activities of consumers and firms have both costs and benefits. Consumers make choices based on the perceived benefits from consuming a good or service, but they also face the costs of paying for it. Similarly, firms invest in producing goods or services based on the potential profits, but they also bear the costs of production. Economic analysis considers both these costs and benefits to understand how consumers and firms make decisions and how markets work.

The Activities of Consumers and Firms