8

Behavioral Economics

Answer: C

The traditional economic model assumes that people make rational decisions to maximize their own benefit. Behavioral economists, however, have shown that humans often make choices that contradict this model. People may value fairness over profit, make different decisions based on how options are presented, or stick with default choices even when better options exist. These findings have transformed how economists understand decision-making.

What main point does the text make about human decision-making?

A. People always try to maximize their personal profit
B. Economic models are never useful for understanding behavior
C. Human decisions often don't follow the traditional rational model ✓
D. Behavioral economics was developed in the traditional model

Detailed Explanation

Choice C is correct. The text states that "humans often make choices that contradict" the rational model, giving examples like valuing fairness over profit.

Key Evidence:

• "often make choices that contradict this model"
• Multiple examples of non-rational behavior

Why others are wrong: A (contradicts main point), B (too extreme—doesn't say models are never useful), D (misunderstands relationship).

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