Which of the following is not true about how people make decisions ?
Correct answer: D. People are always rational maximizers
- A. people give too much weight to a small number of vivid observations
- B. People are sometimes too sure of their own abilities
- C. All of these answers are actually true statements about how people make decisions.
- D. People are always rational maximizers
- E. People are reluctant to change their minds in the face of new information
Explanation
Behavioral economics shows that people may rely too heavily on vivid examples, be overconfident, and resist updating beliefs. Therefore, the claim that people are always rational maximizers is not true.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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