Question 1

Entrepreneurs are willing to take risks because

Accepted Answer

Entrepreneurs are willing to take risks because the patent and copyright system provides an exclusive right to sell the product for a period of time. This can create a competitive advantage and increase the potential for profits. However, it is important to note that the patent and copyright system does not guarantee success or profitability, as market demand and competition can still impact the success of a product or business.

Question 2

Which of the following is NOT a type of incentive?

Accepted Answer

Positive and negative incentives involve rewarding desirable behavior or punishing undesirable behavior, respectively. Direct and indirect incentives refer to incentives that are given directly to an individual, such as a pay increase or promotion, versus incentives that indirectly benefit an individual, such as improved working conditions. Complementary is not a type of incentive, but rather refers to goods or services that are used together to enhance each other's value.

Question 3

Actions and activities are discouraged with

Accepted Answer

Negative incentives are used to discourage actions and activities by imposing a penalty or punishment for non-compliance. For example, fines for littering or speeding are negative incentives used to discourage these actions. Positive incentives, direct incentives, indirect incentives, and unintended consequences are not used to discourage actions, but instead may encourage or discourage certain behaviors for different reasons.

Question 4

Google has started a project to scan all books and make those that are not copyrighted available to people free of charge.Why is it important that only books without a copyright are available?

Accepted Answer

If all books, including those under copyright, were made available for free, it would undermine the economic incentive for writers and publishers to invest time and resources in creating new works. This could discourage the creation and publication of new books. By only making books without a copyright available, Google is not infringing on the rights of copyright holders and is still encouraging the production of new works by providing access to works that are in the public domain.

Question 5

In a growing number of cities,stores are required either not to make available plastic or paper bags or to do so only for an additional fee.What kind of incentive is this fee?

Accepted Answer

The fee imposed on making plastic or paper bags available is a direct incentive to customers to bring their reusable bags. This fee aims to discourage the use of single-use plastic or paper bags and promote a more eco-friendly behavior.

Question 6

Many professors have a policy that punishes individuals if they don't come to class.Instead of punishing students who don't attend class,what could the professor do to provide a positive incentive to come to class?

Accepted Answer

Providing extra points or rewards for attending class is a positive incentive that encourages students to come to class without punishing those who do not attend. This method also creates a positive classroom environment where attendance is valued and students are motivated to actively participate in lectures and discussions.

Question 7

The government places warnings on cigarette and liquor packages.These warnings serve as a(n)

Accepted Answer

The warnings on cigarette and liquor packages serve as a negative incentive, as they are meant to deter people from purchasing and consuming these products.

Question 8

The U.S.federal government offers homeowners a tax deduction for their home loan interest payments.This reduction in taxes serves as a(n)________ incentive to buy a house.

Accepted Answer

The answer of The U.S.federal government offers homeowners a tax...

Question 9

Actions and activities are encouraged with which type of incentive?

Accepted Answer

Positive incentives are used to encourage actions and activities by offering rewards or benefits. This can include things like bonuses, prizes, or recognition for a job well done. By offering a positive incentive, individuals are more likely to engage in the desired behavior as they see a direct benefit in doing so.

Question 10

The patent system

Accepted Answer

The patent system acts as a direct positive incentive by granting inventors exclusive rights to their inventions for a certain period, encouraging innovation and investment in research and development.

Question 11

On which of the following concepts do economists focus their study when explaining how humans behave?

Accepted Answer

Economists primarily focus on incentives, which are the rewards or punishments that motivate people to take certain actions or behave in a particular manner.

Question 12

A parent that pays a child an allowance for doing chores is providing a(n)________ incentive.

Accepted Answer

The parent is providing a reward (allowance) for completing a task (chores), which is an example of a positive incentive.

Question 13

Public buildings in the United States are required to be accessible to the disabled and,as a result,almost all have an elevator.What would be an example of a positive direct incentive for those who can to use stairs?

Accepted Answer

A positive direct incentive for individuals to use stairs would be that it gives them some exercise and makes them healthier. This incentive reinforces the notion that physical activity is beneficial for individuals' overall health and wellbeing.

Question 14

An example of a direct negative incentive is

Accepted Answer

Direct negative incentives involve the use of punishment or threats of punishment to motivate behavior. Threatening to fire those who do not perform well is an example of such an incentive. The other options (A, B, D, E) are examples of positive incentives, which involve rewards or benefits to motivate behavior.

Question 15

Economics professors are well aware of the importance of incentives.Which of the following situations shows the use of a positive incentive?

Accepted Answer

By offering the opportunity to earn a higher grade through extra credit work, the professor is providing a positive incentive for students to put in additional effort and improve their performance.

Question 16

A camera takes pictures of drivers who do not stop at a red light,and this practice is used to issue traffic tickets.These red light cameras can be understood as serving a(n)

Accepted Answer

The red light cameras serve as a negative incentive since they discourage individuals from driving through a red light by issuing traffic tickets.

Question 17

An example of a direct positive incentive is

Accepted Answer

Providing a commission for sales is a direct positive incentive because it rewards employees for their work and encourages them to sell more in order to earn more commission. The other options either provide negative consequences (A and E) or provide assistance in case something negative happens (B and C), but they do not directly incentivize a positive action.

Question 18

A car insurance company is willing to offer accident-free drivers a discount.This is an example of

Accepted Answer

A discount for accident-free drivers is a positive incentive, as it encourages and rewards good driving behavior.

Question 19

If the government wanted to give people a negative direct incentive not to save money,what would be the appropriate policy?

Accepted Answer

Imposing a tax on individuals for saving their money would provide a negative direct incentive not to save. This is because individuals would have to pay a penalty or tax for keeping their money instead of spending it, discouraging them from saving.

Question 20

When a ticket is given to a pedestrian for jaywalking,what type of incentive exists?

Accepted Answer

The ticket given to the pedestrian for jaywalking serves as a punishment for breaking the law, therefore providing a negative incentive to discourage the behavior in the future.

Quiz 1: Five Foundations of Economics