If people act as if they maximize profits even though profits are not exactly what they have in mind as they decide what to do, then assuming that they do indeed try to maximize profits can support a sound economic analysis.

Question

Quizplus · Accepted Answer

This statement is true as long as people's behavior can be reasonably approximated by profit maximization. Even if individuals have other motivations or constraints, assuming that they try to optimize their economic outcomes can be a useful simplification for understanding market behavior, predicting outcomes, and designing policies. However, it is important to acknowledge the potential limitations of profit maximization as a realistic or comprehensive model of human behavior.

If People Act as If They Maximize Profits Even Though