When Economists Say That People Choose Rationally, This Means

question 26

Multiple Choice

When economists say that people choose rationally, this means

• A) they gather all relevant information before making their purchases
• B) once a pattern of behavior has been established, people tend to become set in their ways
• C) people respond in predictable ways to changes in costs and benefits
• D) people rarely make errors when they are permitted to make transactions
• E) once made, decisions are never reversed

Identify the different biases (like overconfidence, conservatism, and regret avoidance) affecting investor behavior.

Comprehend how anomalies and psychological biases lead to market inefficiencies.

Analyze the impact of recent information on investors' decisions and market outcomes.

Understand the mechanisms and implications of forecasting errors in financial markets.