What is meant by the term "incentives," and why are they important?
What will be an ideal response?
Incentives are rewards for engaging in particular activities. Much of human behavior can be explained in terms of incentives. For example, grades in school are an incentive, as are paychecks for work. Incentives are important because rational human beings seeking to promote their own welfare will respond to incentives in predictable ways.
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Refer to Figure 2-6. If the economy is currently producing at point E, what is the opportunity cost of moving to point D?
A) 10 thousand hammers B) 8 thousand wrenches C) 13 thousand hammers D) 0 wrenches
At a given output level, a monopolist earns a profit only if the
A. slope of its TR curve exceeds the slope of his or her TC curve. B. height of its MR curve exceeds the height of his or her MC curve. C. height of its demand curve exceeds the height of his or her MR curve. D. height of its demand curve exceeds the height of his or her ATC curve.
What is the rule for efficient output selection and how does the competitive market achieve it?
Deadweight losses occur when the quantity of an output produced is
A. such that the marginal benefit of the output is just equal to the marginal cost. B. greater than the competitive equilibrium quantity. C. less than or greater than the competitive equilibrium quantity. D. less than the competitive equilibrium quantity.