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 who did trade in their old automobiles to take advantage of the government offer 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.

Question

Quizplus · Accepted Answer

This scenario demonstrates that people respond to economic incentives, as the government is offering a financial incentive for consumers to trade in their old cars for new, more efficient ones.