A recurring theme in economics is that people:

• A. always act irrationally regardless of circumstances
• B. ignore changes in costs and benefits
• C. respond to incentives in predictable ways
• D. make decisions solely based on tradition

Answer: (C)

Verified step by step guidance

1. Understand the concept of incentives in economics: Incentives are factors that motivate individuals to make decisions and act in certain ways. They can be positive (rewards) or negative (penalties).
2. Recognize that economic theory assumes individuals respond to changes in costs and benefits, meaning they adjust their behavior when incentives change.
3. Evaluate each statement in the problem by comparing it to the economic principle that people respond to incentives: - 'Always act irrationally regardless of circumstances' contradicts the assumption of rational behavior. - 'Ignore changes in costs and benefits' contradicts the idea that incentives influence decisions. - 'Make decisions solely based on tradition' ignores the role of incentives and rational choice.
4. Identify that the statement 'respond to incentives in predictable ways' aligns with the fundamental economic assumption that people make decisions by weighing costs and benefits.
5. Conclude that the correct answer is the one that reflects the economic principle of responding to incentives, as this explains predictable decision-making behavior.