Economists argue that consumers are rational and that they allocate their income among the purchase of goods in such a way that maximizes their total utility. The higher their income, the more goods they buy and the higher is the total utility. If that's the case, how do you explain the fact that many people willingly give up some of their income to help the less fortunate? Do they sacrifice

Question

utility?
a. Of course they sacrifice total utility but that doesn't make them irrational. They get satisfaction from helping others.
b. They sacrifice only that part of total utility that the income given away would have generated had it been spent on goods used for themselves. Irrational? Perhapsaccording to the economist's definition of rationality, but not according to others.
c. Their total utility is not less because the marginal utility they gain by giving a dollar to others is higher than the marginal utility they derive from spending that dollar onthemselves.
d. We cannot say if their total utility has changed because we cannot engage in interpersonal comparisons of utility.
e. What they lose in total utility, they make up in consumer surplus, and that's rational.

Answer 1

C