Question 1

The government places warnings on cigarette and liquor packages.These warnings serve as a(n):
A) positive incentive.
B) negative incentive.
C) indirect incentive.
D) opportunity cost.
E) way to make cigarettes and liquor more scarce.

Accepted Answer

The warnings on cigarette and liquor packages serve as a negative incentive, as they discourage individuals from consuming these products by highlighting potential harm and risks associated with their usage.

Question 2

A car insurance company is willing to offer accident-free drivers a discount.This is an example of:
A) a positive incentive.
B) a negative incentive.
C) an opportunity cost.
D) a comparative advantage.
E) scarcity.

Accepted Answer

The offer of a discount is a positive incentive, as it encourages drivers to continue driving safely and avoid accidents.

Question 3

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?
A) Those who come to class are given extra points.
B) Those who do not come to class have their grade reduced.
C) Those who come to class will be asked questions, and if they answer them incorrectly, their grade will be lowered.
D) Those who come to class will be ridiculed.
E) Those who do not come to class might be dropped from the course.

Accepted Answer

Giving extra points to students who attend class is a positive incentive that rewards the behavior that the professor wants to encourage. This approach is more effective and less punitive than penalizing students who do not attend class or threatening them with negative consequences. It also recognizes and acknowledges the effort and commitment of students who make the effort to attend class regularly.

Question 4

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?
A) Using the stairs will make it seem that you care about your health and that you aren't lazy.
B) Using the stairs will increase the risk of tripping and falling.
C) Using the stairs will take more time than taking the elevator and will increase the risk of missing an important meeting.
D) Using the stairs will give you some exercise and make you healthier.
E) Using the stairs will put elevator repair professionals out of work.

Accepted Answer

The positive direct incentive for using stairs would be to promote the health benefits of the exercise involved in climbing stairs. This would encourage people to use the stairs for their own benefit, rather than relying solely on the elevator.

Question 5

When a ticket is given to a pedestrian for jaywalking,what type of incentive exists?
A) a positive incentive
B) a negative incentive
C) a neutral incentive
D) a complementary incentive
E) an unintended incentive

Accepted Answer

A ticket for jaywalking is a form of negative incentive, as it is intended to discourage the behavior of crossing the street outside of designated areas. The ticket serves as a punishment for breaking the law, and is designed to discourage the behavior from happening again in the future.

Question 6

A parent that pays a child an allowance for doing chores is providing a(n):
A) positive incentive.
B) negative incentive.
C) neutral incentive.
D) complementary incentive.
E) unintended incentive.

Accepted Answer

Paying a child an allowance for doing chores is a positive incentive because it rewards the child for performing a desired behavior (doing chores).

Question 7

An example of a direct negative incentive is:
A) providing a commission for sales.
B) awarding a promotion for hard work.
C) threatening to fire those who do not perform well.
D) providing an orientation for new employees.
E) providing generous benefits and pay for employees.

Accepted Answer

Direct negative incentives involve a punishment or threat of consequence for not meeting expectations or goals. Threatening to fire employees who do not perform well is an example of a direct negative incentive. Options A, B, D, and E are all examples of positive incentives, which offer rewards or benefits for meeting expectations or exceeding goals.

Question 8

Actions and activities are discouraged with which type of incentive?
A) positive
B) negative
C) neutral
D) complementary
E) unintended

Accepted Answer

Negative incentives discourage certain actions or activities by imposing penalties or punishments.

Question 9

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?
A) a direct incentive
B) an indirect incentive
C) a neutral incentive
D) a complementary incentive
E) an unintended incentive

Accepted Answer

The fee is a direct incentive as it directly influences the decision of the customers to either bring their own bags or pay for the bags provided by the store. The fee is directly tied to the behavior that is being encouraged, which is to reduce the consumption of single-use bags.

Question 10

The patent system:
A) acts as a direct positive incentive.
B) acts as a direct negative incentive.
C) acts as an indirect positive incentive.
D) acts as an indirect negative incentive.
E) does not provide an incentive.

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

Which of the following is not a type of incentive?
A) positive
B) negative
C) complementary
D) indirect
E) direct

Accepted Answer

Positive and negative incentives involve rewards or punishments for a certain behavior, while direct and indirect incentives refer to the method of delivery. Complementary incentives are not a type of incentive, as they refer to goods or services that accompany a primary product or service (e.g. free car wash with an oil change).

Question 12

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.
A) direct incentive
B) indirect incentive
C) neutral incentive
D) complementary incentive
E) unintended incentive

Accepted Answer

The tax deduction for home loan interest payments is a direct incentive because it directly influences individuals to buy a home by lowering the cost of borrowing money for a mortgage.

Question 13

Economics professors are well aware of the importance of incentives.Which of the following situations shows the use of a positive incentive?
A) Students who show up late to class will not be allowed in the classroom.
B) Students who do not have a doctor's note will not be allowed to take an exam at a different time.
C) Students can choose whether or not they want to attend class-there is no attendance policy.
D) Students can choose to do extra credit at the end of the semester.
E) The professor decides to teach the class by reading out of the textbook to the entire class.

Accepted Answer

Offering extra credit at the end of the semester is a positive incentive as it rewards students for working harder and can motivate them to improve their grades. Choices A and B are negative incentives, as they punish students for negative behavior. Choice C does not offer any incentive for attending class, positive or negative. Choice E is not related to incentives at all.

Question 14

Which of the following concepts do economists focus their study on when explaining how humans behave?
A) fairness
B) money
C) emotions
D) incentives
E) justice

Accepted Answer

Economists focus on incentives when explaining how humans behave because individuals and organizations respond to incentives in predictable ways to maximize their self-interest.

Question 15

Entrepreneurs are willing to take risks because:
A) technology provides a way to sidestep the patent and copyright system.
B) the patent and copyright system provides an exclusive right to sell the product for a period of time.
C) the patent and copyright system guarantees a certain level of profit.
D) technology always increases costs and prevents competitors from entering the market.
E) the patent and copyright system guarantees that the risks taken will be rewarded.

Accepted Answer

The patent and copyright system provides an exclusive right to sell the product for a period of time. This exclusive right can provide a competitive advantage and generate profits, which may incentivize entrepreneurs to take risks in developing new products or technologies that can be patented or copyrighted.

Question 16

An example of a direct positive incentive is:
A) a prison sentence for committing a crime.
B) unemployment insurance for those who are laid off.
C) providing a workplace safety program.
D) providing a commission for sales.
E) threatening to fire those who do not perform well.

Accepted Answer

Providing a commission for sales is an example of a direct positive incentive. This is because the commission provides a direct financial reward for making sales and serves as an incentive for employees to work harder and sell more. The other options listed are either negative incentives (such as A and E) or indirect positive incentives (such as B and C).

Question 17

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?
A) If all books were scanned and available free of charge, copyright holders would face positive incentive to continue writing and publishing books.
B) If all books were scanned and available free of charge, copyright holders would face a negative incentive to continue writing and publishing books.
C) If only copyrighted texts were scanned and available free of charge, copyright holders would face an indirect incentive to continue writing and publishing books.
D) If only non-copyrighted books were scanned and available free of charge, copyright holders would face a negative incentive to continue writing and publishing books.
E) If only non-copyrighted books were scanned and available free of charge, copyright holders would face an indirect incentive to continue writing and publishing books.

Accepted Answer

Making copyrighted books available for free would undermine the financial incentive for authors and publishers to create and distribute new works, as they would not be able to earn revenue from their copyrighted material.

Question 18

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 a(n):
A) positive incentive to encourage individuals to stop at a red light.
B) negative incentive to discourage individuals from driving through a red light.
C) indirect incentive to encourage individuals to stop at a red light.
D) direct incentive to encourage individuals to stop at a red light.
E) negative incentive to encourage individuals to drive through a red light.

Accepted Answer

Red light cameras serve as a negative incentive because they provide a consequence (traffic ticket) for drivers who do not stop at a red light, therefore discouraging individuals from driving through a red light.

Question 19

If the government wanted to give people a negative direct incentive not to save money,what would be the appropriate policy?
A) providing individuals a subsidy to save their money
B) providing funding for an advertising campaign encouraging people to spend more money
C) informing individuals that saving money causes people not to spend money, which will cause them to lose their jobs
D) imposing a tax on individuals for saving their money
E) informing consumers about all that they could buy with their money with the hope that they spend more

Accepted Answer

Imposing a tax on individuals for saving their money would make it less appealing to save money and instead incentivize spending.

Question 20

Actions and activities are encouraged with which type of incentive?
A) positive
B) negative
C) neutral
D) complementary
E) unintended

Accepted Answer

Positive incentives encourage actions and activities by offering rewards and benefits for desired behavior.

Quiz 1: The Five Foundations of Economics

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

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

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?

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?

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

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

An example of a direct negative incentive is:

Actions and activities are discouraged with which type of incentive?

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?

The patent system:

Which of the following is not a type of incentive?

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.

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

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

Entrepreneurs are willing to take risks because:

An example of a direct positive incentive is:

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?

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 a(n) :

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

Actions and activities are encouraged with which type of incentive?