An Incentive Is

question 182

Multiple Choice

An incentive is

• A)what you must give up to get something.
• B)a good or service that satisfies wants.
• C)when people make rational choices by comparing costs and benefits.
• D)a reward or a penalty that encourages or discourages an action.
• E)a choice is made on the margin.

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Definitions:

Optimal Tax

A tax system designed to achieve the best balance between efficiency and equity.

Marginal Social Benefit

The supplementary gain for society derived from the consumption of one extra unit of a good or service.

Marginal Social Cost

The cost to society of producing an additional unit of a good or service, including both private costs and any externalities.

Marginal Social Benefit

The additional gain to society as a whole from an additional unit of a good or service.