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:

Cultural Background

The cultural context and environment a person is raised in, including traditions, languages, beliefs, and practices that influence their worldview.

Freud

Sigmund Freud, an Austrian neurologist and the founder of psychoanalysis, a clinical method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Human Nature

Fundamental traits, behaviors, and feelings that are inherent to human beings, often considered a combination of inherited and societal factors.

Biological Approach

A perspective in psychology and medicine focusing on biological and genetic factors to understand human behavior and diseases, emphasizing the importance of the body's biological systems.