The assumption of rationality implies that market participants:
A)always choose the option with the highest gross benefit.
B)assess expected benefits and expected costs.
C)do not make decisions under uncertainty.
D)do not care about benefits or costs accruing in the future.

Question

Quizplus · Accepted Answer

The assumption of rationality implies that market participants assess expected benefits and expected costs, and choose the option that maximizes their net benefit. This means that they consider both the benefits and the costs of different options before making a decision. They do not necessarily always choose the option with the highest gross benefit, and they do make decisions under uncertainty. Additionally, they do care about benefits and costs accruing in the future, and take these into account when making decisions.

The Assumption of Rationality Implies That Market Participants