Final answer:
Public choice is the branch of economics that examines the incentives faced by individuals involved in the public sector. It is a subtopic of microeconomics that analyzes how individual behavior shapes government policies.
Step-by-step explanation:
The branch of economics that attempts to understand the outcomes observed in the public sector by examining the incentives faced by the individual actors involved (such as voters, politicians, and bureaucrats) is known as public choice. Public choice is a subtopic of microeconomics, which is the branch of economics that focuses on the actions of particular agents within the economy.
Public choice theory analyzes how individual behavior and decision-making shape the outcomes in the public sector. It studies topics such as voter behavior, lobbying, and the influence of interest groups on government policies. By investigating the incentives faced by individuals in the public sector, public choice theory provides insights into the economic implications of public policy decisions.