Question

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more​ efficient, new models by paying up to​ $5,000 for the old automobiles. These consumers would be exemplifying the economic idea that:_____.
A. people are rational.
B. people respond to economic incentives.
C. optimal decisions are made at the margin.
D. equity is more important than efficiency.

Answer 1

Answer:

B. people respond to economic incentives.

Explanation:

Economic incentive is material given by someone, that is capable of motivating the other person to behave or act in a certain way. If economic incentives come from a government, it can be in form of tax incentives, subsidies or any monetary gift in form of cash or near cash.

To the economist, human being being rational, will respond to economic incentives in various forms.