The central hypothesis of the theory of the firm is that the firm chooses an organizational form that maximizes profits:
A)given capital requirements.
B)net of operating costs.
C)given market prices.
D)net of any transactions costs.

Question

Quizplus · Accepted Answer

The central hypothesis of the theory of the firm is that the firm will choose an organizational form that maximizes profits net of any transaction costs. This means that the firm will consider not only the capital requirements and market prices, but also the costs of transactions such as hiring employees, contracting with suppliers, and negotiating with customers. Thus, the best choice is D, which takes into account all relevant factors.

The Central Hypothesis of the Theory of the Firm Is