Question

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

Answer 1

Answer:

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

Explanation:

Economists make assumptions about markets based on the belief individuals take rational choices. This implies people take prudent and logical decisions that yield the most benefits. In other words, it is implicit that individuals always analyze the marginal benefit and cost of a decision before they take it.