quiz 2.4

Economists assume that rational people do all of the following except: A. undertake activities that benefit others and hurt themselves. B. weigh the benefits and costs of all possible alternative actions. C. use all available information as they act to achieve their goals.

A

Economists assume that rational behavior is useful in explaining choices people make

even though people may not behave rationally all the time.

Marginal utility is the

extra satisfaction received from consuming one more unit of a product.

An item has utility for a consumer if it

generates enjoyment or satisfaction

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.

rationally

When people make rational choices, they

weigh the costs and benefits of their options and act to satisfy their wants.

Rational self-interest means

your looking out for what is best for you as an individual.

Economists assume that individuals

are rational and respond to incentives

Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets. By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that

people are rational

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that

people with health insurance are more likely to be overweight than people without health insurance.