Economic theory assumes people are always rational. Yet observation indicates that people do not always behave rationally. Which of the following is not a systematic mistake people make in their decisionmaking?
A)People often interpret information to fit beliefs already held.
B)People place too much emphasis in their decisionmaking on a few extreme situations of which they are aware.
C)People tend to view current prices differently than they view future prices.
D)People are too sure of their own abilities.

Question

Quizplus · Accepted Answer

This is not a systematic mistake but a rational behavior as people usually prefer present consumption over future consumption due to time preference. Choices A, B, and D are systematic mistakes people make in their decision-making.

Economic Theory Assumes People Are Always Rational