Explain the economic assumption that people are rational. What ...

[magmichele12]

Explain the economic assumption that people are rational.
 
  What will be an ideal response?

Question 2

Refer to Figure 5-5. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does D2 represent?
 
  A) the demand curve reflecting the sum of social and external benefits
  B) the demand curve reflecting social benefits
  C) the demand curve reflecting private benefits
  D) the demand curve reflecting external benefits

[dreamfighter72]

Answer to Question 1

People are rational means that economists assume consumers and firms will use all available information as they act to achieve their goals. Rational individuals weigh the benefits and costs of each action, and they choose an action only if the benefits exceed the costs.

Answer to Question 2

B

[magmichele12]

YES! Correct, THANKS for helping me on my review

[alvinum]

Thanks for the timely response, appreciate it