Which of the following statements about the idea that people are rational is correct?

• A. Rational people always make decisions that benefit society as a whole.
• B. Rational people ignore incentives when making decisions.
• C. Rational people systematically and purposefully do the best they can to achieve their objectives, given the available opportunities.
• D. Rationality assumes that people never make mistakes in judgment.

Answer: (C)

Verified step by step guidance

1. Understand the concept of rationality in microeconomics: Rational people are those who make decisions aimed at maximizing their objectives, given the information and opportunities available to them.
2. Evaluate each statement by comparing it to the economic definition of rationality:
3. 1. "Rational people always make decisions that benefit society as a whole." - Consider that individuals focus on their own objectives, which may or may not align with societal benefits.
4. 2. "Rational people ignore incentives when making decisions." - Recall that incentives are crucial in influencing rational decision-making.
5. 3. "Rational people systematically and purposefully do the best they can to achieve their objectives, given the available opportunities." - This aligns with the economic definition of rationality.
6. 4. "Rationality assumes that people never make mistakes in judgment." - Understand that rationality does not imply perfection or absence of errors, but rather consistent goal-oriented behavior.