EC 200-B01

Rational utility maximizers ≠ selfish ≠ no mistakes

know normative v. positive

Utility Maximizing Rule
if you’re thinking of doing something, compare costs/benefits

emc = expected marginal costs
emb = expected marginal benefits
basic rule:
IF emc < emb THEN act ELSE no action

    How to measure costs & benefits?

  • utility
  • unit (util, Bentham’s hedonic units)
  • utility in $ value
  • sunk costs: resources already spent
  • “rational ignorance”

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