Econ 202- Chapter 1

Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational? A. We cannot assume that this pricing decision was rational because we do not have enough information to make an assumption. B. When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality. C. Microsoft's choice cannot be​ rational: the price is clearly more than most people are willing and able to pay. D. ​Microsoft's choice was​ rational: the price will maximize profit.

B. When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality.

Consider the following​ statement: ​ "The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes​ mistakes." What is the most correct response to this​ statement? A. Economics is a proven field of​ study, and it has already solved this problem. B. Economics has a lot of problems such as those that caused the Great Recession. C. Economics assumes that consumers and firms are​ rational, not that they always make the right decisions. D. Economics does assume that consumers and firms always make the correct decisions.

C. Economics assumes that consumers and firms are​ rational, not that they always make the right decisions.

Economists assume that people are rational in the sense that... A. they do not respond to economic incentives. B. they generally make the correct choices. C. they use all available information as they take actions intended to achieve their goals. D. they make decisions based on​ total, rather than​ marginal, variables.

C. they use all available information as they take actions intended to achieve their goals.

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls... A. economics. B. the market. C. rationality. D. scarcity.

D. scarcity.