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.
Which of the above statements demonstrates that economic agents respond to incentives?
A) a only.
B) b only.
C) a and b.
D) a, b, and c.

Question

Quizplus · Accepted Answer

All three statements demonstrate that economic agents are responding to incentives. In statement a, consumers are responding to the incentive of a lower price by purchasing more MP3 players. In statement b, schools are responding to the incentive of potentially higher costs associated with vandalism by taking steps to prevent it. In statement c, citrus growers are responding to the incentive of a lower selling price by increasing their production to maintain their profits. Therefore, the correct answer is C.

Consider the Following Statements: A