Multiple Choice
Which of the following expresses the formula for the marginal utility per dollar spent on a product?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
Multiple Choice
Which of the following types of theories is the maximizing profits strategy based on?
A
Normative theory
B
Behavioral theory
C
Positive theory
D
Descriptive theory
Verified step by step guidance1
Step 1: Understand the meaning of each type of theory in economics. Normative theory involves value judgments about what ought to be, Behavioral theory studies actual behavior and decision-making processes, Positive theory explains and predicts economic phenomena based on objective analysis, and Descriptive theory describes how things are without necessarily explaining why.
Step 2: Recognize that the maximizing profits strategy is a model used to explain how firms make decisions to achieve the highest possible profit, which is an objective and predictive approach.
Step 3: Since the maximizing profits strategy aims to describe and predict firm behavior based on rational decision-making, it aligns with Positive theory, which focuses on explaining economic behavior without value judgments.
Step 4: Contrast this with Normative theory, which would prescribe how firms should behave, and Behavioral theory, which would focus on actual observed behavior that may deviate from profit maximization.
Step 5: Conclude that the maximizing profits strategy is based on Positive theory because it provides a testable and objective explanation of firm behavior in microeconomics.
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