A Level Economics AQA Practice Exam

What does rational economic decision-making assume?

1. All economic agents act against their best interest

2. Economic decisions are made randomly

3. All economic decision-makers aim to maximize their satisfaction

4. Firms prioritize social responsibility over profit

The correct answer is: All economic decision-makers aim to maximize their satisfaction

Rational economic decision-making assumes that all economic decision-makers aim to maximize their satisfaction. This concept is fundamental in economics, where it is believed that individuals and firms make choices based on a systematic assessment of available options to achieve the best possible outcomes given their preferences, resources, and constraints. In the context of individuals, this means that consumers will seek to maximize their utility, meaning they will choose products and services that provide the most satisfaction for them, given their budget constraints. For firms, the assumption extends to profit maximization, where businesses aim to produce goods and services in a way that maximizes their returns while minimizing costs. This rational behavior is critical in many economic models that rely on the assumption that agents are able to weigh the trade-offs of different choices logically and will choose the options that yield the highest net benefit.