DISS - SUMMATIVE TEST

The theory that people make economic choices based on their own self-interest is called what?

• Chaos Theory

• Self-interest theory

• Rational Choice Theory

• Altruistic Choice Theory

Which of the following BEST describes the importance behind the rational choice theory?

• Rational choice theory is not very widely accepted in economic theory.

• People are random in their economic choices so rational choice theory is not an important economic theory.

• Understanding whether someone is making the right choice on how to spend their resources is important to economists.

• Understanding why people decide to make choices on how to spend their resources is an important building block for more complex economic theory.

HUMSS-WEBER has 20 students and I asks the students if they would prefer a g cash or ball-point pen as part of an experiment. 10 students indicate a preference for the g cash while the other 10 students prefer a ball-point pen. I give out 10 ball-point pens and 10 g cash amount randomly to the students. Because the process is random some students receive their preferred item while others do not. According to the theory of rational choice, if students were given the option of trading what would we expect to see in terms of student trading g cash amount and ball-point pens?

• No trading would occur.

• Because people make random choices, there isn't a way to make prediction about what would happen.

• We would expect students who did receive their preferred item to give it away to others who didn't receive their preferred item.

• Because there is enough of the g cash amounts and ball-point pens to meet the exact preferences of every student, we would expect those students who didn't receive their preferred item to trade with each other. In the end everyone would receive their preferred item.

Which of the following is not an assumption of Rational Choice Theory?

• Individuals act rationally.

• Choices and preferences are both transitive.

• Individuals act in their collective interests.

• Individuals need sufficient information to make rational choice.

As per analysis, most of the teachings and theories of Rational Choice Theory is taken from?

• Economics

• Sociology

• Politics and Governance

• Psychology

In Rational Choice Theory, emotions and attachment are necessary in making a decision to get the best results.

• Yes

• No

• Maybe

• Not at all

With Rational Choice Theory, a person predicts the outcome and pattern of decisions and choices.

• Yes

• No

• Maybe

• Not at all

The goal of an individual in decision making is to minimize benefits and maximize cost.

• Yes

• No

• Maybe

• Not at all

In applying Rational Choice Theory, people act in a selfish manner , using reason to get what they want.

• Yes

• No

• Maybe

• Not at all

Rational individuals used to rank alternatives from best to worst and choosing the most feasible action/outcomes even if it will yield negative result.

• Yes

• No

• Maybe

• Not at all