The principle that consumers and firms optimize
A) is not helpful because some economic agents may behave irrationally.
B) is helpful because it allows us to analyze how economic agents respond to changes in their environment.
C) only applies to perfectly competitive markets.
D) is helpful because it determines the available technology.
E) is explained by their work-leisure choices.

Question

Quizplus · Accepted Answer

The principle that consumers and firms optimize is helpful because it allows us to analyze how economic agents respond to changes in their environment. This principle assumes that individuals make rational choices based on their preferences and available information, and therefore, it provides a useful framework to analyze how they allocate their resources and respond to changes in prices, technology, or other factors. Although not all economic agents may behave rationally, the optimizing principle still provides a useful benchmark to understand their behavior and predict their responses to different stimuli.

The Principle That Consumers and Firms Optimize