Which best describes the effect negative incentives have on a certain course of action?

• A. They discourage individuals from pursuing that course of action.
• B. They encourage individuals to pursue that course of action.
• C. They guarantee individuals will choose that course of action.
• D. They have no impact on individuals' decisions regarding that course of action.

Answer: (A)

Verified step by step guidance

1. Understand the concept of incentives in microeconomics: incentives are factors that motivate individuals to perform certain actions or make certain decisions.
2. Recognize that negative incentives are designed to discourage or reduce the likelihood of a particular behavior by imposing a cost or penalty.
3. Analyze how a negative incentive affects decision-making: since individuals respond to costs or penalties by avoiding them, negative incentives tend to reduce the attractiveness of the associated action.
4. Compare the options given: the correct description should reflect that negative incentives decrease the likelihood of pursuing the action, rather than encouraging or guaranteeing it.
5. Conclude that negative incentives discourage individuals from pursuing the course of action because they increase the cost or risk associated with it.