Understanding Rational Choice Theory

What is the primary purpose of Cost-Benefit Analysis?

• To determine the environmental impact of a project.

• To assess the social implications of a decision.

• To analyze the historical performance of similar projects.

• To evaluate the financial implications of a project or decision.

How do you determine the costs in a Cost-Benefit Analysis?

• Use historical data without adjusting for current market conditions.

• Estimate costs based on personal opinions rather than data.

• Identify and quantify all relevant direct, indirect, opportunity, and external costs.

• Only consider direct costs and ignore indirect costs.

What factors should be considered in a Cost-Benefit Analysis?

• Quantitative factors (costs, revenues) and qualitative factors (social, environmental impacts).

• Historical data analysis

• Only financial metrics

• Personal opinions and preferences

Describe the steps involved in the Decision-Making Process.

• Consulting only one person's opinion without further research

• Making a decision based on gut feeling alone

• The correct answer is to follow a structured decision-making process.

• Ignoring the problem and hoping it resolves itself

What role does information play in the Decision-Making Process?

• Decisions are made solely on intuition without data.

• Information complicates the decision-making process.

• Information is crucial for informed decision-making, guiding choices and evaluating outcomes.

• Information is irrelevant to decision-making.

How can biases affect decision-making?

• Biases always lead to better decision-making.

• Biases can negatively impact decision-making by distorting perceptions and leading to poor choices.

• Biases have no effect on decision-making.

• Biases only affect decisions in group settings.

What is the Rational Actor Model?

• A model that predicts irrational behavior in decision-making.

• A theory that suggests decisions are made randomly without logic.

• A framework that focuses solely on emotional responses.

• The Rational Actor Model is a decision-making framework that assumes rational behavior to maximize utility.

How does the Rational Actor Model differ from other decision-making models?

• Other models prioritize group consensus over individual utility maximization.

• The Rational Actor Model emphasizes complete rationality and utility maximization, unlike other models that consider cognitive limitations and incremental changes.

• The Rational Actor Model is based on historical data rather than current preferences.

• The Rational Actor Model ignores rationality and focuses on emotional decision-making.

What assumptions are made in the Rational Actor Model?

• The Rational Actor Model assumes emotional decision-making.

• The Rational Actor Model relies on limited information and random choices.

• The Rational Actor Model prioritizes social preferences over individual utility.

• The Rational Actor Model assumes rationality, complete information, consistent preferences, and utility maximization.

Explain how preferences are represented in the Rational Actor Model.

• Preferences are represented by a fixed set of choices without ranking.

• Preferences are determined solely by emotional responses.

• Preferences in the Rational Actor Model are represented by a utility function that ranks options based on the actor's goals.

• Preferences are based on random selection without any goals.