When an economist assumes that the owners of firms are motivated only by the desire to maximize profits, the economist most likely believes that
A)it doesn't matter whether or not the assumption is descriptively accurate; what matters is whether a theory built on the assumption predicts well.
B)all people enter business for their own selfish gain.
C)individuals entering business are quite narrow in their personal objectives.
D)the assumption is inaccurate, since surveys have been taken and the owners of firms have admitted that they care about more than just profits.
E)the assumption is descriptively accurate, since surveys have been taken and the owners of firms have admitted that their only objective is to maximize profits.

Question

Quizplus · Accepted Answer

The economist is assuming that firms maximize profits, but they may have other goals as well. However, this assumption is made for the sake of building a theory that can predict behaviors and outcomes. The accuracy of the assumption is not as important as its ability to generate useful insights.

When an Economist Assumes That the Owners of Firms Are