Consider the following statements and then answer the question:
(i) Although they are not always true, the assumptions for economic models are true enough of the time to accurately represent models of economic behavior.
(ii) People care only about fairness or equity.
(iii) Economists are satisficers themselves.
Why is economics built on the assumption that people are rational?
A. (i) only
B. (ii) only
C. (iii) only
D. (i) and (ii)
E. (i) and (iii)
F. (ii) and (iii)
G. All of the above.
Answer (2)
Economics assumes rational behavior because it allows effective modeling of economic interactions. Statement (i) highlights that models are based on simplified but relevant assumptions. Statements (ii) and (iii) do not align well with the foundation of rational choice theory in economics. ;
The assumption of rational behavior in economics is primarily supported by statement (i), which emphasizes the role of simplified models that accurately represent economic interactions. Statements (ii) and (iii) do not align well with the foundational premise of rational choice theory that people primarily aim to maximize their utility. Therefore, the correct answer is (i) only.
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