Economists assume that firms seek to _____

Question

Quizplus · Accepted Answer

Economists assume that firms seek to maximize economic profit which is the difference between total revenue and total opportunity cost (including both explicit and implicit costs) rather than just maximizing accounting profit or total revenue. Normal profit is included in the firm's opportunity cost as an implicit cost, so firms still seek to earn it. Maximizing cost does not make any sense from a business perspective.

Economists Assume That Firms Seek to _____