Economists assume that people are rational in the sense that a. they use all available information as they take actions intended to achieve their goals. b. they make decisions based on total, rather than marginal, variables. c. they do not respond to economic incentives. d. they generally make the correct choices.

Banana computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. how will this decision affect the firm? a. the firm will be protected against the principal-agent problem. b. the firm's administrative costs will be low because of necessary bureaucracy. c. the firm will have more flexibility in purchasing and comparing prices of goods and services. d. the firm will have high-powered incentives, such as hourly wages and salaries.