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

Question

Quizplus · Accepted Answer

The theory of the firm is based on the assumption that firms seek to maximize profits, and they are considered as a single, consistent decision-making unit. This assumption forms the foundation of modern microeconomics and is widely accepted as a fundamental principle of business management. The other choices have either incorrect assumptions or are not relevant to the theory of the firm.

The Theory of the Firm Is Based on the Following