What is meant by the term "optimization"? What do economists usually believe about how individuals optimize?
What will be an ideal response?
Choosing the best option from a set of feasible alternatives is referred to as optimization. Whatever choice a person faces, economists believe that he or she is likely to try to choose optimally. Economists don't assume that people always successfully choose the best feasible option, but that people try to do so and usually do a good job with whatever potentially limited information they have. This doesn't mean that people are always perfect calculators. Instead, economists believe that people's behavior is only approximated by optimization. In other words, they believe that an agent's actual choice will sometimes differ from that person's optimal choice.
You might also like to view...
Economists believe that trade is necessary for prosperity because
a. every country lacks some vital resources that it can get only by trade. b. each country's climate makes it a relatively efficient producer of some goods, and an inefficient producer of other goods. c. specialization permits large outputs and can produce economies of scale. d. All of the above are correct.
Profit can be defined as the
a. difference between the sales revenue of a business firm and the opportunity cost of the resources required to produce the goods supplied by the firm. b. difference between a company's income and direct monetary costs of production. c. difference between the price of a product and the consumer's valuation of the good. d. amount of total revenue earned by the firm minus its payments to stockholders.