The Theory of Rational Choice Assumes That

question 35

Multiple Choice

The theory of rational choice assumes that:

• A) tastes do not matter.
• B) tastes are given.
• C) tastes influence the supply curve.
• D) tastes do not affect the demand curve.

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Definitions:

Edgeworth Box

A diagram representing various distributions of resources, used to examine issues of allocation efficiency in economics.

Indifference Curves

Graphical representations showing combinations of two goods that give a consumer equal levels of satisfaction, indicating preferences.

Pareto Optimal

A condition of resource allocation in which it is impossible to make any one individual better off without making someone else worse off, signifying an efficient distribution of resources.

Competitive Equilibrium Price

The market price where the quantity of goods supplied is equal to the quantity of goods demanded, effectively clearing the market.