Suppose the state of Wyoming passes a law that increases the tax on cigarettes.As a result,smokers who live in Wyoming start purchasing their cigarettes in surrounding states.Which of the following principles does this best illustrate?
A)People respond to incentives.
B)Rational people think at the margin.
C)Trade can make everyone better off.
D)Markets are usually a good way to organize economic activity.

Question

Quizplus · Accepted Answer

This best illustrates the principle of people responding to incentives - smokers in Wyoming are responding to the increased tax on cigarettes by changing their behavior and purchasing cigarettes elsewhere where the tax is not as high.

Suppose the State of Wyoming Passes a Law That Increases