What do economists mean when they say that behavior is rational?

• A. People ignore incentives when making choices.
• B. Individuals systematically weigh costs and benefits to make decisions that maximize their self-interest.
• C. People always make perfect decisions without any mistakes.
• D. Individuals act only in ways that benefit society as a whole.

Answer: (B)

Verified step by step guidance

1. Understand that in microeconomics, 'rational behavior' refers to how individuals make decisions based on their preferences and available information.
2. Recognize that rationality means individuals systematically compare the costs and benefits of different options before making a choice.
3. Note that rational behavior implies individuals aim to maximize their own self-interest, not necessarily to benefit society as a whole.
4. Be aware that rationality does not mean individuals always make perfect or mistake-free decisions; rather, they make the best decisions they can given their information and constraints.
5. Summarize that economists define rational behavior as the process where individuals weigh incentives and trade-offs to make decisions that maximize their personal benefit.