Which of the following mistakes do consumers commonly commit when making decisions in response to incentives?

• A. Always maximizing utility perfectly
• B. Fully accounting for all future consequences
• C. Ignoring opportunity costs
• D. Never being influenced by framing effects

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of opportunity cost, which is the value of the next best alternative foregone when making a decision.
2. Step 2: Recognize that consumers often fail to consider opportunity costs, meaning they might ignore what they give up when choosing one option over another.
3. Step 3: Review the other options: 'Always maximizing utility perfectly' is unrealistic because consumers face constraints and imperfect information; 'Fully accounting for all future consequences' is also unlikely due to limited foresight; 'Never being influenced by framing effects' is incorrect because framing effects do influence decisions.
4. Step 4: Conclude that the common mistake consumers make is 'Ignoring opportunity costs' because it leads to suboptimal decision-making by not considering what is sacrificed.
5. Step 5: Summarize that understanding opportunity costs helps consumers make better decisions by evaluating all relevant trade-offs.