The economists who design public policy often assume that: consumers and firms are:

A) fully rational and fully informed.
B) affected by loss aversion, framing, anchoring and other reference points that affect their behavior.
C) sometimes but not always irrational and largely uninformed.
D) neutral to public policy as they are in risk taking.

Public Policy

Government actions and regulatory measures that aim to address public issues, guide economic, social, and administrative activities.

Fully Rational

A term describing decision-makers who, with complete information, are able to consistently make choices that maximize their utility or profit.

Loss Aversion

A cognitive bias where the pain of losing is psychologically about twice as powerful as the pleasure of gaining.