Question

In making rational choices, which of the following is true? a. We respond to marginal benefits and marginal costs. b. We do not have to account for changes in marginal cost. c. We do not have to account for changes in marginal benefits. d. We have to consider both marginal costs and sunk costs. e. Incentives do not matter.

Answer 1

Answer:

The correct answer is letter "A": We respond to marginal benefits and marginal costs.

Explanation:

Rational Choice Theory assumes an individual will always make prudent and optimal decisions that yield the most benefits. It is the basis of most mainstream economic theories. The rational choice theory considers the marginal benefit compared to the marginal cost of individuals' decisions. It could prevent people from taking an option without analyzing what is most beneficial for them.