Which of the following is NOT an example of a group responding to an incentive?

• A. A company continuing to pollute despite a new tax on emissions
• B. Students studying harder after a scholarship is announced for top grades
• C. Employees working overtime to earn a performance bonus
• D. Consumers buying more ice cream when its price is reduced

Answer: (A)

Verified step by step guidance

1. Understand the concept of an incentive in microeconomics: an incentive is something that motivates individuals or groups to behave in a certain way, often by offering a reward or imposing a cost.
2. Analyze each option to see if the group’s behavior changes in response to an incentive:
3. For 'Students studying harder after a scholarship is announced for top grades' — the scholarship acts as a positive incentive encouraging more effort.
4. For 'Employees working overtime to earn a performance bonus' — the bonus is a financial incentive motivating extra work.
5. For 'Consumers buying more ice cream when its price is reduced' — the lower price is an incentive that encourages increased consumption.
6. For 'A company continuing to pollute despite a new tax on emissions' — the tax is a negative incentive meant to discourage pollution, but the company’s behavior does not change, so this is NOT an example of responding to an incentive.