Question

Considering the costs and benefits in order to make a decision is known as:

a) illogical thinking
b) belief bias
c) utility theory
d) reasoning schemata

Answer 1

Utility theory involves considering the costs and benefits to make a decision, employing cost/benefit analysis to weigh trade-offs.

Step-by-step explanation:

Considering the costs and benefits in order to make a decision is known as utility theory. This approach involves conducting a cost/benefit analysis, where one compares the sacrifices and gains associated with a decision. The process includes weighing marginal costs, which are the extra cost of adding one more unit, against marginal benefits, the extra benefit from adding that unit. A tool used in this process is a Cost Benefit Analysis chart, where costs are listed on one side and benefits on the other, helping to clarify the trade-offs involved in a decision.