Question 1

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 because they deter consumers from buying these products by highlighting their harmful effects on health. This is an example of using a penalty to discourage a certain behavior.

Question 2

Which of the following is not a type of incentive?

Accepted Answer

Positive, negative, indirect, and direct are all types of incentives, while complementary is not. Complementary items are not used as a direct motivation to influence behavior, but rather as an added bonus or benefit to a purchase or action.

Question 3

Which of the following concepts do economists focus their study on when explaining how humans behave?

Accepted Answer

Economists often focus on explaining behavior through incentives, such as monetary rewards or punishments, rather than concepts related to fairness, emotions, or justice.

Question 4

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

Accepted Answer

Offering a discount to accident-free drivers is a positive incentive, as it is meant to encourage or reward a desirable behavior (safe driving) rather than punish an undesirable behavior (getting into accidents).

Question 5

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 6

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 incentive for them to not save as they would have to pay more taxes.

Question 7

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 use stairs?

Accepted Answer

The positive direct incentive for using the stairs would be to give someone exercise and make them healthier. This incentive would appeal to those who prioritize their health and fitness.

Question 8

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

Accepted Answer

The red light cameras serve as a negative incentive because they discourage individuals from driving through a red light by potentially issuing a traffic ticket.

Question 9

An example of a direct negative incentive is:

Accepted Answer

Direct negative incentives are punishments or threats used to discourage certain behavior. Threatening to fire those who do not perform well is an example of a direct negative incentive.

Question 10

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

Accepted Answer

A tax deduction for home loan interest payments is a direct incentive because it directly reduces the cost of purchasing a home by lowering the amount of taxes owed.

Question 11

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 for plastic or paper bags directly incentivizes customers to bring their own reusable bags instead of relying on single-use bags provided by the store. This fee directly affects the behavior of customers and provides a clear motivation for them to change their habits.

Question 12

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

Accepted Answer

A ticket for jaywalking is a form of negative reinforcement, meant to discourage the behavior in the future. It is a consequence (ticket) meant to decrease the likelihood of the behavior (jaywalking). Therefore, the incentive in this situation is a negative incentive.

Question 13

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

Accepted Answer

Option D provides students with the opportunity to earn extra credit, which is a positive incentive for them to improve their grade. Options A and B use negative incentives (being denied access to the classroom or exam) to discourage undesirable behavior. Option C has no incentive either way. Option E does not provide any incentives at all, positive or negative.

Question 14

An example of a direct positive incentive is:

Accepted Answer

Providing a commission for sales is a direct positive incentive because it provides a reward for performing well (making sales) and encourages individuals to continue performing at a high level to receive the incentive. The other options are either negative incentives (prison sentence, threatening to fire) or indirect incentives (unemployment insurance, workplace safety program) that may not directly motivate individuals to perform better.

Question 15

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

Accepted Answer

A parent who pays a child an allowance for doing chores is providing a positive incentive. This is because the child is being rewarded for completing a task, which is likely to encourage them to continue doing it in the future.

Question 16

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

This is a positive incentive that rewards students for attending class and encourages attendance without penalizing those who cannot attend for legitimate reasons.

Question 17

Entrepreneurs are willing to take risks because:

Accepted Answer

The patent and copyright system provides an exclusive right to sell the product for a period of time, which can lead to higher profits and reduced competition. This incentive encourages entrepreneurs to take risks in developing new products or innovations.

Question 18

Actions and activities are discouraged with which type of incentive?

Accepted Answer

Negative incentives discourage actions and activities, while positive incentives encourage them. Neutral incentives don't have any effect on behavior. Complementary incentives are additional rewards or benefits for performing an action. Unintended incentives are not deliberate or planned, but can still influence behavior.

Question 19

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 20

Actions and activities are encouraged with which type of incentive?

Accepted Answer

Positive incentives are rewards or benefits that encourage individuals to engage in certain actions or behaviors. These incentives can be anything from praise and recognition to monetary rewards, and they are meant to increase motivation and drive individuals to achieve their goals. This type of incentive is most effective in encouraging actions and activities.

Quiz 1: The Five Foundations of Economics

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