When economists say that people act as rational decision makers, they mean that:
A) people act on the basis of their instincts.
B) once a pattern of behavior has been established, people tend to become set in their ways.
C) people respond in predictable ways to changes in costs and benefits.
D) people rarely make errors when permitted to make transactions.
E) once made, decisions are never reversed.

Question

Quizplus · Accepted Answer

Rational decision-making assumes that individuals will weigh the costs and benefits of every option available to them and make a choice based on having the highest net benefit. This means that people are responsive to changes in costs and benefits which is the characteristic of option C. Instincts (option A) do play a role in human behavior, but rational decision-making is a more deliberate process. Option B and E refer to fixed behavior patterns, which is not the underlying assumption of rational choice theory. Option D is incorrect because humans are known to make errors when making decisions.

When Economists Say That People Act as Rational Decision Makers