Multiple Choice
Which of the following demonstrates how people respond to incentives to make themselves better off?
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0. Basic Principles of Economics
People Respond to Incentives
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Which term describes self-interested actions that consider the reactions of others in economic decision-making?
A
Strategic behavior
B
Marginal analysis
C
Opportunity cost
D
Market equilibrium
Verified step by step guidance1
Understand the concept of self-interested actions in economics, which means individuals or firms make decisions to maximize their own benefit or utility.
Recognize that when these self-interested actions take into account how others might respond or react, the decision-making involves anticipating others' behavior.
Identify that this type of decision-making is called 'Strategic behavior,' where agents consider the potential reactions of others before making choices.
Differentiate 'Strategic behavior' from other terms: 'Marginal analysis' involves comparing additional benefits and costs, 'Opportunity cost' is the value of the next best alternative foregone, and 'Market equilibrium' is the state where supply equals demand.
Conclude that the term describing self-interested actions that consider others' reactions is 'Strategic behavior.'
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