A key principle of economics is that people respond to incentives. An incentive... Could be a penalty but could not be a reward. Could be either a reward or a penalty. Could be a reward but could not be a penalty. Is the opposite of a tradeoff.

A key principle of economics is that people respond to incentives. An incentive... Could be a penalty but could not be a reward. Could be either a reward or a penalty. Could be a reward but could not be a penalty. Is the opposite of a tradeoff.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter1: What Economics Is About

Section: Chapter Questions

Problem 3QP

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Question

A key principle of economics is that people respond to incentives. An incentive...
Could be a penalty but could not be a reward.
Could be either a reward or a penalty.
Could be a reward but could not be a penalty.
Is the opposite of a tradeoff.

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Step 1: Introduce the key principle of economics, which states that people respond to incentives

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Step 2: Define an incentive

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Why do economic agents always respond to incentives
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What does behavioral economics have to say about each of the following statements? a. “Nobody is truly charitable—they just give money to show off.” b. “America has a ruthless capitalist system. Considerations of fairness are totally ignored.” c. “Selfish people always get ahead. It’s like nobody even notices!”
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Explain how people respond to incentives and how markets turn self-interested behavior to the benefit of consumers.
in the text, the author describes an experiment in which a group of children were told a hypothetical story in which an adult punished a neutral act, such as a child practicing a musical instrument. Afterward, the children classified the act of playing a musical instrument as bad behavior. This experiment lends credence to the power of: a. modeling. b. reinforcement. c. the “blank slate.” d. cognitive dissonance.
a) Describe an important trade-off you recently faced. b) Define opportunity cost and give an example of some action that has both a monetary and nonmonetary opportunity cost. c) Describe an incentive your parents offered to you in an effort to influence your behavior.
a) Trade-offs are important part of economic decision making. You are supposed to Analyze and explain any three trade-offs that you face in your life. b) You plan to study on weekend and your friends ask you to go to a farm house with them. What do you think is the true cost of spending your weekend on a farmhouse with friends? c) You plan to spend your weekend working at your father’s superstore for a wage, but your friends ask you go play cricket at the weekend. What do you think is the true cost of spending your weekend playing cricket with friends?
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