IBDP Economics HL – Microeconomics – Critique of the maximizing behavior of consumers and producers -Paper 1 Exam Style Practice Questions
Critique of the maximizing behavior of consumers and producers Paper 1?
Exam Style Questions.
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IBDP Economic SL- All Topics
Exam Style Question for IBDP Economics HL- Critique of the maximizing behavior of consumers and producers -Paper 1
Question
Explain why some firms might choose the goal of profit maximization while others might choose to adopt satisficing behaviour.
▶️Answer/Explanation
Answers may include:
- definitions of profit maximization and satisficing
- diagram(s) to show MC = MR maximizes profit
- explanation of how profits are maximized when MR = MC and that satisficing behaviour can cover a range of objectives and also lead to outcomes that are less profitable
- examples of firms with different goals.
Question
Using real-world examples, discuss the assumption that consumers always seek to maximize their utility.
▶️Answer/Explanation
Answers may include:
- Terminology: utility.
- Explanation: of the assumption in terms of consumer rationality, perfect information and the maximization of total utility.
- Diagram: not needed for this question.
- Synthesis (discuss): a challenge to the assumption in terms of the limitations to rational consumer choice such as imperfect information, bounded rationality, bounded selfishness, biases – rule of thumb, anchoring and framing, availability; consideration of the word “always”.
- Examples: real-world examples of consumers acting rationally or where there are limitations to their ability to do so.