Which of the following assumptions best reflects a basic understanding economists have about the world?

• A. People are unable to learn from past experiences when making choices.
• B. People always act in the interest of society rather than themselves.
• C. Individuals use all available information to make decisions that maximize their well-being.
• D. Individuals make decisions randomly without considering costs and benefits.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand that economists build models based on assumptions about human behavior to analyze economic decisions.
2. Step 2: Recognize that one fundamental assumption in economics is that individuals are rational and aim to maximize their well-being or utility.
3. Step 3: Note that this rationality implies individuals use all available information to weigh costs and benefits before making decisions.
4. Step 4: Contrast this with other options, such as people acting randomly or ignoring past experiences, which do not align with the basic economic assumption of rational decision-making.
5. Step 5: Conclude that the assumption 'Individuals use all available information to make decisions that maximize their well-being' best reflects the foundational economic perspective on human behavior.