Consider the following statements:
a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area.
b. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards.
c. Citrus growers produce more oranges when the selling price of oranges falls.
The statement above that demonstrates that economic agents respond to incentives is:
A)a only
B)b only
C)a and b
D)a, b, and c

Question

Consider the following statements: 
a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area.
b. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards.
c. Citrus growers produce more oranges when the selling price of oranges falls.
The statement above that demonstrates that economic agents respond to incentives is:
A)a only
B)b only
C)a and b
D)a, b, and c

Quizplus · Accepted Answer

The statements a and b both show that economic agents (consumers and schools) respond to incentives by making choices that are based on cost and benefit analysis. Statement c shows that citrus growers respond to the incentive of price changes by adjusting their production levels to maximize their profit. Therefore, options a and b together illustrate this concept.

Consider the Following Statements