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Is marginalism falsifiable?

Economics Dec 15, 2020

Is marginalism falsifiable?

Expert Solution

Marginalism assumes that businesses are owned and operated by one person or a group of individuals. In reality, collective ownership of businesses is different from management. Most businesses are not single entities working to maximize profits, they are made up of individuals who specialize in an industry and have multiple goals. Another unrealistic assumption made by marginalism is that the main objective of businesses is to make profits (MC = MR). Businesses have more than one objective. The empirical evidence for businesses only aiming to make profits is vague. Marginalism also maintains that businesses are certain of the revenue they expect to make, namely that businesses operate under certainty. However, being certain about future revenue solely based on the past revenue is not as easy as marginalism suggests. Hence, marginalism is falsifiable.

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