How did speculators take advantage of the Homestead Act in the context of economic incentives?

• A. They donated the land to public institutions without seeking any financial gain.
• B. They acquired large amounts of land by using false claims and then sold it for profit.
• C. They used the land exclusively for agricultural production as intended by the government.
• D. They refused to participate in the Homestead Act to avoid government intervention.

Answer: (B)

Verified step by step guidance

1. Understand the purpose of the Homestead Act: It was designed to encourage settlement and agricultural development by granting land to individuals willing to live on and cultivate it.
2. Identify the economic incentives created by the Act: The government offered land at little or no cost to settlers, motivating people to claim and develop the land.
3. Analyze how speculators responded to these incentives: Instead of using the land for farming, speculators exploited loopholes by making false claims to acquire large tracts of land.
4. Recognize the speculators' strategy: They would then sell the acquired land at a profit, capitalizing on the increased value due to settlement and development pressures.
5. Conclude that this behavior reflects a common economic principle where agents respond to incentives in ways that maximize their own benefit, sometimes contrary to the original policy intent.