People Respond to Incentives quiz #1 Flashcards
People Respond to Incentives quiz #1
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Which is an example of a negative incentive for producers?
A tax increase on production, which discourages producers from making more goods. Which statement best describes incentives?
Incentives are factors that motivate people to act in ways that make themselves better off. Which best describes the effect negative incentives have on a certain course of action?
Negative incentives discourage people from pursuing a particular action. What type of incentives appeal to someone’s concern about a cause?
Moral incentives appeal to someone’s concern about a cause. Which phrase describes the income effect?
The income effect describes how changes in income influence the quantity of goods people buy. Which of the following is not an example of a group responding to an incentive?
Ignoring a price change and continuing to buy the same quantity of a good. Which of the following statements best captures the core economic concept of 'incentives'?
People respond to incentives by changing their behavior to make themselves better off. Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
Yes, if Microsoft believes that enough consumers will buy at that price to maximize profit. Which of the following describe the market system's virtue of incentives?
The market system encourages people to exploit opportunities to improve their well-being. Which of the following is an example of a positive incentive?
A bonus paid to employees for meeting sales targets. What is the indirect incentive in the unemployment insurance program?
It may encourage some people to remain unemployed longer to continue receiving benefits. Which of the following is the most basic form of incentive compensation?
A wage or salary paid for work performed. How do you summarize the behavior of many individual buyers?
Individual buyers respond to price changes and incentives to maximize their benefit. If people act with rational expectations, what does this imply?
They use all available information to make decisions that maximize their well-being. Which of the following mistakes do consumers commonly commit when making decisions?
Failing to consider all available incentives and alternatives. Which of the following is true of incentives?
Incentives can be positive or negative and influence people's choices. Which of the following best describes the field of behavioral economics?
Behavioral economics studies how psychological factors affect economic decision-making. How can too little risk affect your investing experience?
Taking too little risk may result in lower potential returns on investments. Which of these groups responds to the incentive of higher profits?
Producers and businesses respond to higher profits by increasing production. Why is it so important to get incentives right when creating a policy?
Proper incentives ensure that people respond in ways that achieve the policy’s goals. How do you think monetary and non-monetary incentives impact your decisions?
Both types of incentives influence choices by offering rewards or benefits for certain actions. How does the concept of the 'invisible hand' support this idea?
The invisible hand suggests that individuals pursuing their own incentives can benefit society as a whole. Which two sentences describe incentives?
Incentives motivate people to act. People respond to incentives to make themselves better off. Which factor plays the biggest role in motivating economic decisions in a market economy?
Incentives play the biggest role in motivating economic decisions. Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
Yes, if the price maximizes Microsoft’s profit given consumer demand. Which of the following increase with increasing incentive intensity? (Check all that apply.)
Effort and productivity typically increase with stronger incentives. Which of the following demonstrates how people respond to incentives to make themselves better off?
Choosing to buy oranges instead of apples when apple prices rise. Which of the following scenarios is the best example of an incentive?
Offering a discount to customers who buy in bulk. Which of the following types of power do monetary incentives represent?
Monetary incentives represent economic power. Why do economic decisions vary from person to person even under the same circumstances?
People have different preferences, information, and responses to incentives. What is the term for self-interested actions that take the reactions of others into account?
Strategic behavior. Which statement is most likely true of countries that average one computer per person?
They likely have high levels of technology adoption and economic development. Which is useful for making rational choices?
Considering all available incentives and alternatives. Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
Yes, if it aligns with maximizing profit based on consumer willingness to pay. Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
Yes, if the price reflects consumer demand and maximizes profit. Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
Yes, if Microsoft expects enough sales at that price to make it profitable. In the market, actions known as incentives affect
The choices and behaviors of buyers and sellers. Investors respond to the incentive of
Potential financial returns or profits. It is estimated that less education equals higher ______.
Unemployment. Because people respond to incentives
Their choices and behaviors change when incentives change.
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