Consider the following statements:
A.Consumers rent more kayaks from a vendor that rents kayaks at a lower price than other rival kayak vendors along Waikiki beach.
B.Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment.
C.Farmers produce more cotton when its selling price falls.
Which of the above statements demonstrates that economic agents respond to incentives?
A) a only.
B) b only.
C) c only.
D) a and b.
E) a, b, and c.

Question

Quizplus · Accepted Answer

Statement A demonstrates that consumers are responding to the incentive of lower prices to rent kayaks from a particular vendor. Statement B shows that department stores are responding to the incentive of lowering their costs by investing in expensive security equipment to reduce shoplifting. Both of these are examples of economic agents responding to incentives. Statement C is not necessarily an example of economic agents responding to incentives, as it is unclear what the incentive is for farmers to produce more cotton when the price falls.

Consider the Following Statements