7

Set 1: Inferences (Advanced)

Explanation

Answer: B

PASSAGE

Game theory models assume rational actors who maximize utility, yet experimental economics consistently finds that people cooperate more, punish unfairness more, and act altruistically more than these models predict. Behavioral economists have proposed modified theories incorporating concepts like 'fairness preferences' and 'bounded rationality.'

What does the passage suggest about theoretical modeling?

A. Game theory predictions are always accurate.
B. Empirical findings can expose the limitations of foundational assumptions and drive theoretical revision.✓ Correct
C. People always behave selfishly.
D. Behavioral economics has been rejected by scholars.

Detailed Explanation

Models assume X; experiments find otherwise → 'modified theories' = data driving revision.

Key Evidence:

• "consistently finds that people... more than models predict"

• "proposed modified theories"

Why others are wrong: A (Predictions are consistently contradicted.), C (People cooperate and act altruistically.), D (Modified theories are 'proposed' = accepted framework.).

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