Final answer:
The statement is TRUE as utility theory focuses on the relationship between outcomes and values, aiming to maximize happiness or utility in decision-making. Behavioral economics, acknowledging the role of psychological factors, aligns with this theory by factoring in feelings and state of mind, broadening traditional consumer theory.
Step-by-step explanation:
Utility theory, indeed, centers on rational behavior by focusing on the correlation between outcomes and values, thus making the statement TRUE. In the context of economics and behavioral economics, utility is the term used to describe the satisfaction or happiness a consumer derives from consuming goods and services. Jeremy Bentham and his principle of utility laid the groundwork for this theory, suggesting that actions are correct if they promote happiness and wrong if they lead to unhappiness. This principle is operationalized in modern times through activities like cost-benefit analysis, where governments assess policies by weighing the total benefits against total costs.
Behaviors in real life often defy traditional consumer theory because feelings and state of mind are disregarded by the latter. Behavioral economics offers an alternative by acknowledging how these psychological factors can influence decisions, such as overvaluing a lost dollar more than a gained dollar. The aim, as understood by utilitarians, is to maximize net happiness - the sum of all happiness minus the sum of all unhappiness. This perspective inherently supports the notion that rational behaviors are ones that maximize utility, taking into account both positive and negative outcomes.