Economists assume that people are rational in the sense that:

• A. they never make mistakes when choosing between alternatives
• B. they always make decisions that benefit society as a whole
• C. they use all available information to achieve their objectives
• D. they are motivated solely by altruism

Answer: (C)

Verified step by step guidance

1. Understand the concept of rationality in economics: Economists define rationality as the behavior of individuals who make decisions aimed at maximizing their own utility or objectives, given the information they have.
2. Recognize that rationality does not imply perfection or altruism: Rational individuals may make mistakes or have imperfect information, and they are not necessarily motivated by societal benefit or altruism.
3. Focus on the key assumption: Economists assume that people use all available information efficiently to make choices that best achieve their personal goals.
4. Eliminate incorrect options: People do not always make decisions that benefit society as a whole, nor are they solely motivated by altruism, and they can make mistakes.
5. Conclude that the correct understanding of rationality in economics is that individuals use all available information to achieve their objectives.