Question

1. What decisions do you make that you would call rational? What decisions in your life would you describe as irrational? Why? Be specific and relate your thinking to what we discussed in terms of rationality and behavioral economics.

2. Calculate and graph the following short run costs for your brewery:

Var Input (Labor)	Fixed Input (Stills)	Total Product (barrels beer)	FC	VC	TC	MC	AC	AFC	AVC
0	5	0	8000	0
1	5	50	8000	500
2	5	150	8000	1000
3	5	500	8000	1500
4	5	1000	8000	2000
5	5	1400	8000	2500
6	5	1600	8000	3000
7	5	1650	8000	3500
8	5	1675	8000	4000

Answer 1

1) In behavioral economics, Rational decisions are those for which we have maximum utility and minimum cost spent. Whereas irrational decisions are those when we spend money on less important items or purchase more expensive items just for the sake for branding or article of distinction.

Keeping in mind the above situations and these definitions we should try to make most of Rational decisions and buy or consume items very efficiently as to maximize the utility.

Spending money on high priced branded clothes or any item that you can buy with low amount without compromising with quality is an irrational decision