Suppose the State of Iowa Passes a Law That Increases

question 178

Multiple Choice

Suppose the state of Iowa passes a law that increases the price of cigarettes by $1 per pack.As a result,residents in Iowa start purchasing their cigarettes in surrounding states.Which of the following principles does this best illustrate?

• A) People respond to incentives
• B) Rational people think at the margin
• C) Trade can make everyone better off
• D) Markets are usually a good way to organize economic activity

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Definitions:

Freud

Refers to Sigmund Freud, an Austrian neurologist who founded psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Personal Conflicts

Internal struggles resulting from opposing or incompatible desires, drives, or impulses within oneself.

Psychosocial Development

A theory proposed by Erik Erikson, which suggests that an individual's personality develops through a series of stages, each characterized by a specific psychological challenge.

Self-restraint

The ability to control one's own emotions, desires, or actions, often seen as a form of self-discipline.