Multiple Choice
Which of the following statements is NOT typically enacted by government as a policy?
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0. Basic Principles of Economics
Positive and Normative Analysis
Multiple Choice
Which critical assumption in microeconomics arises from the insight that bundles of resources differ across firms?
A
Firms always maximize profits regardless of resource differences.
B
Market prices are determined solely by consumer preferences.
C
All firms operate under identical cost structures.
D
Firms have heterogeneous resources leading to different production capabilities.
Verified step by step guidance1
Understand that in microeconomics, a critical assumption about firms relates to the nature of their resources and production capabilities.
Recognize that firms do not all have the same bundles of resources; instead, they possess heterogeneous resources, meaning their inputs and capabilities differ.
This heterogeneity leads to differences in production functions and cost structures across firms, which affects how they produce goods and services.
The assumption that all firms operate under identical cost structures is therefore unrealistic because resource differences cause variation in costs and outputs.
Hence, the key assumption is that firms have heterogeneous resources, which explains why firms differ in their production capabilities and cost functions.
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