When economists assume people make rational decisions, it means that
A) people never make mistakes.
B) a rational person can never appear to make irrational decisions.
C) people are always selfish.
D) a rational person will respond to the benefits and costs associated with incentives.

Question

Quizplus · Accepted Answer

When economists assume people make rational decisions, it means that they believe people will respond to the benefits and costs associated with incentives. This does not imply that people never make mistakes or are always selfish, but instead assumes that people will make the choice that maximizes their own utility given the information available to them. A rational person can still appear to make irrational decisions if they have incomplete or imperfect information, but this assumption helps economists understand how people behave in certain situations.

When Economists Assume People Make Rational Decisions, It Means That