If the government decides to increase the monetary amount of

If the government decides to increase the monetary amount of disability insurance payments to those who have been permanently disabled, it will make life easier for those who have been disabled. The fact that it could cause some individuals to falsely claim to be disabled would be considered:

a. A direct response to an incentive

b. An indirect response to an incentive

c. An opportunity cost

d. A marginal cost

Solution

Option (b).

The potential possibility that some individuals will exploit the disability insurance scheme in order to derive financial benefit for themselves, is an indirect response to an incentive.