Some would say the study of economics is simply a study of how humans respond to incentives.

1. Define the rational-actor paradigm. How is this concept applied to how people make choices?

2. The US tax code uses this paradigm extensively. Give an example.

3. How does the decision model presented in Chapter 1 (including the rational-actor paradigm) form the foundation of making high-level managerial decisions? Give an example regarding commissioned salespeople.