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Chapter 1: Q 19 (page 16)

During her years of college, Dominique discovered that her three favorite subjects were astronomy, chemistry, and political science. She chose to major in astronomy because she had seen data indicating that science majors earn higher-than-average wages and because she liked astronomy better than both chemistry and political science. Upon graduation, however, she learned that average wages in chemistry fields were 20percent higher than average wages earned by astronomers. Did Dominique's behavior violate the rationality assumption?

Short Answer

Expert verified

Yes, she used the rule of thumb method and followed bounded rationality by considering the easiest choice.

Step by step solution

01

Step 1. Rationality Assumption.

Rationality assumption states that a person should consider every possible choice for decision-making and then choose the best alternative.

02

Step 2. Reason

Yes, she used the rule of thumb method and followed bounded rationality by considering the easiest choice. She did not take into account the wages and just looked for the science subject she liked the most.

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Most popular questions from this chapter

For each of the following approaches that an economist might follow in examining a decision-making process, identify whether the approach relies on the rationality assumption or on the assumption of bounded rationality:

(a) An economic study of the number of online searches that individuals conduct before selecting a particular item to purchase online presumes that people are interested only in their own satisfaction, pursue their ultimate objectives, and consider every relevant option.

(b) An economist seeking to predict the effect that an increase in a state's sales tax rate will have on consumers' purchases of goods and services resumes that people are limited in their ability to process information about how the sales-tax-rate increase will influence the after-tax prices those consumers will pay.

(c) To evaluate the impact of an increase in the range of choices that an individual confronts when deciding among devices for accessing the Internet, an economic researcher makes the assumption that the individual is unable to take into account every new Internet-access option available to her.

Evaluate the role that rational self-interest plays in economic analysis.

Could it be the case that chicken farmers who have both humanitarian and profit motives for keeping their chickens comfortable nonetheless are fully "self-interested"? Explain.

Consider the following statements, based on a positive economic analysis that assumes that all other things remain constant. For each, list one other thing that might change and thus offset the outcome stated.

(a) Increased demand for laptop computers will drive up their price.

(b) Falling gasoline prices will result in additional vacation travel.

(c) A reduction of income tax rates will result in more people working.

Under the rationality assumption, could a woman potentially take into account her family's welfare as well as her own when considering having another child? Explain your reasoning.
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