Economics Professors Are Well Aware of the Importance of Incentives

question 71

Multiple Choice

Economics professors are well aware of the importance of incentives.Which of the following situations shows the use of a positive incentive?

• A) Students who show up late to class will not be allowed in the classroom.
• B) Students who do not have a doctor's note will not be allowed to take an exam at a different time.
• C) Students can choose whether they want to attend class-there is no attendance policy.
• D) Students can choose to do extra credit at the end of the semester.
• E) The professor decides to teach the class by reading out of the textbook to the entire class.

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Definitions:

Socially Optimal

A state or outcome in which the total benefits to society are maximized, taking into account all costs and benefits, both private and external.

Artificially Scarce Good

A good that is made scarce through artificial means such as through intellectual property rights or monopoly pricing, despite its capacity for abundant supply.

External Cost

An uncompensated cost that an individual or firm imposes on others; also known as negative externality.

Marginal Costs

The additional financial burden incurred from producing another unit of a product or service.