D2.Eco.3.9-12: How Incentives Shape What Markets Produce and Distribute
In plain English: D2.Eco.3.9-12 is the C3 Framework economics indicator for grades 9-12 that asks students to analyze how incentives influence what is produced and distributed in a market system. Students trace how prices, profits, subsidies and rules change what producers make and who ends up with it, a core idea of high school economics.
Analyze the ways in which incentives influence what is produced and distributed in a market system.
C3 Framework for Social Studies (NCSS) · Dimension 2: Applying Disciplinary Concepts and Tools · Discipline: Economics · Exchange and Markets · Official standard
D2.Eco.3.9-12 asks students to analyze how incentives, the rewards and penalties that motivate people, influence two things in a market system: what is produced (which goods and services, and how much) and how it is distributed (who ends up with it). Prices and profits are the main incentives in markets: a higher price tells producers that buyers want more and rewards those who supply it, and it also steers the good toward the buyers willing to pay the most. Governments, firms and organizations add their own incentives, such as subsidies, bonuses, piece rates and rules for who goes first, and these can have effects that nobody planned.
Students analyze the incentives Congress wrote into the Pacific Railway Act of 1862 (Source 1), test the price incentive against twenty years of real U.S. oil production and price data from the Energy Information Administration (Source 2 and Diagram 1), and compare four ways a scarce good was produced and distributed after an invented ice storm (Source 3). Activities include an incentive-card analysis, a seat-allocation simulation and a short policy brief.
Learning Objectives
By the end of this lesson, students will be able to:
Define incentives and distinguish price, profit, subsidy and non-money incentives
Analyze how a change in incentives changes what and how much producers make, using a primary source and real data
Analyze how different allocation rules (price, first come, lottery, need) distribute a scarce good, and who gains or loses under each
Identify unintended effects of an incentive and explain how its design caused them
Use evidence and calculations to support a claim about how incentives shaped a market outcome
Prior Knowledge Required
Students should already be comfortable with:
The roles of buyers and sellers in product, labor and financial markets D2.Eco.3.6-8
Analyzing how incentives influence choices and policies D2.Eco.1.9-12
Integrating quantitative data with text evidence RH.9-10.7
"Suppose your school paid students $25 an hour to tutor younger students, instead of offering service hours. What would happen to the amount of tutoring offered? And if 200 students wanted tutoring but only 50 tutoring slots existed, what rule should decide who gets them?"
Collect answers in two columns: what gets produced (more tutors, more hours, maybe tutors chasing the easiest subjects) and who gets it (first come, lottery, those who need it most, those who pay). Tell students that D2.Eco.3.9-12 asks them to analyze exactly these two questions in real markets, and that incentives answer both.
Direct Instruction20 minutes
Key terms for D2.Eco.3.9-12 (working definitions)
Term
Meaning
Example
Incentive
A reward or penalty that motivates people to act in a certain way
A bonus for finishing a job early
Price signal
A change in price that tells producers and buyers how scarce a good has become
A higher price for strawberries after a frost
Profit incentive
The chance to earn revenue above costs, which draws producers toward goods buyers value
A farmer planting the crop that pays more per acre
Subsidy
A payment, loan or grant from government that lowers a producer's cost or raises its reward
Land or loans given to a company that builds a railroad
Allocation (distribution) rule
The way a scarce good is divided among the people who want it
Price, first come first served, lottery, need, or a fixed ration
Unintended consequence
An effect of an incentive that its designers did not plan or want
Workers rushing and making mistakes when paid only for speed
Part 1: What is produced. Producers compare rewards with costs. When a price, subsidy or bonus raises the reward for one product, resources such as land, labor and machines move toward it and away from something else. Ask after each example: who responded to the incentive, and what did they make more or less of?
Part 2: How it is distributed. When a good is scarce, some rule decides who gets it. A market price gives it to those willing and able to pay the most and invites more supply; first come, lotteries and need-based rules give it out in other ways and send other signals. Every rule creates its own incentives: lines reward people with free time, lotteries reward entering many times, and fixed low prices can reward reselling.
Prices and what farmers plant (invented)
Invented example: a farmer can plant corn or soybeans on each acre. Corn yields 180 bushels an acre at $4.50 a bushel and costs $640 an acre to grow; soybeans yield 55 bushels at $11.00 and cost $430. Which crop earns more per acre? What happens if the soybean price rises to $12.00?
Result: Corn: 180 x $4.50 = $810, minus $640 = $170 an acre. Soybeans: 55 x $11.00 = $605, minus $430 = $175 an acre, slightly more. At $12.00: 55 x $12.00 = $660, minus $430 = $230 an acre, now $60 more than corn. Many farmers would shift acres to soybeans, so the price incentive changes what is produced.
Three ways to distribute concert tickets (invented)
Invented example: a 2,000-seat hall sells tickets for a popular show, and about 6,000 fans want one. Compare three rules: (a) first come at $40; (b) a lottery among everyone who registers, at $40; (c) a price high enough that only 2,000 people still want a ticket.
Result: (a) and (b) leave 6,000 - 2,000 = 4,000 fans without tickets. Under (a) the seats go to people who can wait in line or refresh a website fastest; under (b) each registered fan has a 2,000/6,000 = 1/3 chance. In both, some winners may resell at a higher price, an incentive the low price creates. Under (c) the seats go to fans willing and able to pay the most, and the higher revenue rewards the band and the hall for adding shows.
Surge pricing: supply and distribution at once (invented)
Invented example: after a stadium event, a ride app raises its fare from $12 to 1.8 times normal. The number of drivers online nearby rises from 40 to 65. What is the new fare, and how did the incentive change both production and distribution?
Result: New fare: 1.8 x $12 = $21.60. Drivers online: 65 - 40 = 25 more, a (25/40) x 100 = 62.5% increase in rides supplied. Distribution: riders who value a quick ride most pay the surge; others wait, walk or share. Critics see the higher fare as unfair at a busy moment; supporters note that it pulls in the extra drivers.
Pay rules and how much is picked (invented)
Invented example: an orchard pays apple pickers $19 an hour for an 8-hour day, and a typical picker fills 6 bins. The orchard switches to $25 a bin, and a typical picker now fills 8 bins. Compare the pay and the cost per bin, and name one risk of the new incentive.
Result: Hourly: 8 x $19 = $152 for 6 bins, or $152 / 6 = about $25.33 a bin. Piece rate: 8 x $25 = $200 for 8 bins, exactly $25 a bin. The picker earns $48 more and the orchard pays slightly less per bin. Risk: pickers paid for speed may bruise fruit, so the orchard must add quality checks, an example of how incentive design shapes what is produced.
Teacher tip. Students often describe incentives as one-way pushes. Have them name the trade-off each time: what resources leave another use, and who loses out under the allocation rule. Remind them that a price signal does two jobs at once: it draws out more supply and it decides who gets the supply that exists.
Guided Practice15-20 minutes
Congress builds incentives into a law. Context note: in 1862, during the Civil War, Congress passed the Pacific Railway Act to get a railroad and telegraph line built from the Missouri River to the Pacific coast. The Union Pacific company built west and the Central Pacific company built east from California; the lines met at Promontory Summit, Utah Territory, on May 10, 1869. The law did not pay for the railroad directly. Instead it offered land and loans, delivered only as sections of track were finished. Read Source 1 in pairs. Glossary: "extinguish ... Indian titles" (end, by treaty or other means, the legal claims of Native nations to their land), "alternate section" (every other one-square-mile block of land, 640 acres, in a checkerboard), "preëmption" (preemption: a settler's right to buy land he lives on before others), "bonds" (government IOUs, here lent to the company and to be repaid with interest), "per centum per annum" (percent a year), "treble" (three times).
1SEC. 2. [...] The United States shall extinguish as rapidly as may be the Indian titles to all lands falling under the operation of this act and required for the said right of way and grants hereinafter made.
2SEC. 3. And be it further enacted, That there be, and is hereby, granted to the said company, for the purpose of aiding in the construction of said railroad and telegraph line, and to secure the safe and speedy transportation of the mails, troops, munitions of war, and public stores thereon, every alternate section of public land, designated by odd numbers, to the amount of five alternate sections per mile on each side of said railroad, on the line thereof [...] Provided, That all mineral lands shall be excepted from the operation of this act; but where the same shall contain timber, the timber thereon is hereby granted to said company. And all such lands, so granted by this section, which shall not be sold or disposed of by said company within three years after the entire road shall have been completed, shall be subject to settlement and preëmption, like other lands, at a price not exceeding one dollar and twenty-five cents per acre, to be paid to said company.
[...]
3SEC. 5. And be it further enacted, That for the purposes herein mentioned the Secretary of the Treasury shall, upon the certificate in writing of said commissioners of the completion and equipment of forty consecutive miles of said railroad and telegraph, in accordance with the provisions of this act, issue to said company bonds of the United States of one thousand dollars each, payable in thirty years after date, bearing six per centum per annum interest [...] to the amount of sixteen of said bonds per mile for such section of forty miles; and to secure the repayment to the United States, as hereinafter provided, of the amount of said bonds so issued and delivered to said company, together with all interest thereon [...]
[...]
4SEC. 11. And be it further enacted, That for three hundred miles of said road most mountainous and difficult of construction, to wit: one hundred and fifty miles westwardly from the eastern base of the Rocky Mountains, and one hundred and fifty miles eastwardly from the western base of the Sierra Nevada mountains, said points to be fixed by the President of the United States, the bonds to be issued to aid in the construction thereof shall be treble the number per mile [...] and between the sections last named of one hundred and fifty miles each, the bonds to be issued to aid in the construction thereof shall be double the number per mile first mentioned [...]
Thirty-seventh Congress of the United States, An Act to aid in the Construction of a Railroad and Telegraph Line from the Missouri River to the Pacific Ocean (the Pacific Railway Act), July 1, 1862, sections 2, 3, 5 and 11 (Source 1) (1862; this edition 1863). Public domain (published 1863). Source text.
The land incentive. Prompt: in paragraph 2, how much land does the company receive for each mile of track? Teacher note: five alternate sections on each side, so 10 sections a mile; at 640 acres a section that is 10 x 640 = 6,400 acres a mile. The company could sell this land, so every mile built was worth more than the track itself. Ask: why would the company also want settlers along the line? (They would buy land and ship goods on the railroad.)
The loan incentive. Prompt: in paragraph 3, what does the company receive, and when? Teacher note: sixteen $1,000 bonds a mile, or $16,000 a mile, issued only after commissioners certify "forty consecutive miles" complete. Ask: why would Congress wait for a whole stretch instead of paying mile by mile? The bonds carry interest and must be repaid, so they are a loan, not a gift.
Distribution. Prompt: who gets the land under paragraphs 1 and 2, and who loses it? Teacher note: the company gets the odd-numbered sections, and the even-numbered sections stay with the government, which can sell them later at higher prices because the railroad runs nearby. Paragraph 1 commits the government to end, "as rapidly as may be," Native nations' title to the lands the right of way and the grants required, so the land the law handed out first had to be taken out of Native nations' hands. Students should state this as a documented fact of the law.
Unintended effects. Prompt: paragraph 4 pays three times as much a mile in the mountains, with the starting points "fixed by the President." What might a company do in response? Teacher note: it has a reason to argue that the mountains start as early as possible. Historians, for example Stephen Ambrose in Nothing Like It in the World (2000), describe the Central Pacific persuading officials to place the base of the Sierra Nevada closer to Sacramento than the mountains themselves, which earned the higher rate on flatter miles. Ask students what this shows about incentive design.
Independent Practice15 minutes
Real data: does a higher price bring more production? Source 2 is real government data, not invented. It comes from the U.S. Energy Information Administration (EIA), petroleum data series "U.S. Field Production of Crude Oil" (annual, thousand barrels per day) and "Cushing, OK WTI Spot Price FOB" (annual average, dollars per barrel), both released September 30, 2026 (eia.gov, a US government work). WTI (West Texas Intermediate) is the benchmark price for U.S. crude oil. The prices are not adjusted for inflation. Diagram 1 graphs both series.
Source 2: U.S. crude oil field production and WTI price, 2005-2025 (U.S. Energy Information Administration)
Year
Production (thousand barrels per day)
WTI price (dollars per barrel)
2005
5,184
$56.64
2006
5,086
$66.05
2007
5,074
$72.34
2008
5,000
$99.67
2009
5,357
$61.95
2010
5,484
$79.48
2011
5,674
$94.88
2012
6,524
$94.05
2013
7,495
$97.98
2014
8,781
$93.17
2015
9,433
$48.66
2016
8,859
$43.29
2017
9,374
$50.80
2018
10,972
$65.23
2019
12,335
$56.99
2020
11,349
$39.16
2021
11,324
$68.13
2022
12,026
$94.90
2023
12,972
$77.58
2024
13,267
$76.63
2025
13,662
$65.39
Source 2: U.S. Energy Information Administration, Petroleum and Other Liquids data, series MCRFPUS2 and RWTC (annual), release date September 30, 2026.
Students work alone, then compare with a partner: (1) Describe what happened to the price from 2010 to 2014 and to production over the same years. (2) Find one year when the price fell sharply and production fell the next year or the same year. (3) Production rose after 2009 partly because of new drilling methods (horizontal drilling and hydraulic fracturing of shale rock), not only because of the price. Explain why that makes it hard to say how much of the increase the price incentive caused. Quiz questions 6-9 and 17 use Source 2.
Diagram 1 graphs Source 2. Ask students to find the lag: in which year does the production line first turn down after the price collapse of late 2014 and 2015?
Closure10 minutes
After the storm. Introduce Source 3, an invented scenario about a scarce good after an ice storm, for the quiz and the homework. Students read it on their own and mark each response P (affects what is produced or brought in) or D (affects who gets it). Some responses are both.
1Invented scenario, written for this page. Harlow County is a fictional county of about 90,000 people. In January an ice storm brings down power lines, and 40,000 homes lose electricity. The power company says repairs will take about five days. Before the storm, a 5,000-watt portable generator sold for about $700 in the county. Three sellers and one outsider respond in different ways.
2Benson Hardware keeps its price at $700. Its 60 generators sell out in two hours to the people at the front of the line, some of whom drove in from the next county. The store cannot get more until the following week.
3Tri-County Supply raises its price to $1,050. Its first 40 generators sell over two days. The owner also pays a driver $1,200 to bring 50 more from a warehouse 300 miles away, and they arrive on the second day. Some buyers tell a local reporter the price is unfair; others say they would rather pay more than find the shelves empty.
4The Harlow Farmers Co-op, which is owned by its 1,800 members, holds a drawing for its 30 generators at $700. Members who use home medical equipment go first, and the rest of the generators go to names drawn at random. 240 members enter the drawing, and 6 of them use home medical equipment.
5Dale Ruiz, who lives in a city 150 miles away, rents a truck for $900, buys 20 generators there at $650 each, and sells them in a Harlow parking lot for $1,000 each. A county commissioner proposes a rule for future emergencies: no seller may raise the price of emergency supplies by more than 10% during a declared emergency. Supporters say the rule protects families who cannot afford high prices. Opponents say it would stop sellers like Tri-County Supply and Dale from bringing in extra generators.
6Meanwhile, the power company offers its line workers overtime pay of 1.5 times their usual wage and pays crews from three other states to help. Power is back in four days instead of five.
SVHS (invented scenario written for this page), The Ice Storm in Harlow County (Source 3: invented scenario). Original passage written for this page.
Exit ticket: Choose one seller in Source 3. In two sentences, explain how its rule affected (a) how many generators reached the county and (b) which households got them.
Teacher note on the sources: Source 1 is quoted exactly from the official Statutes at Large printing of the 1862 act (12 Stat. 489), checked against the Library of Congress page images; Congress made the terms more generous in a second act in 1864. Its section 2 sentence on "Indian titles" commits the government to end Native nations' title to the land the railroad grants needed, and the lesson treats that as a documented fact of the law. Source 2 is real EIA data. Source 3 is invented, and its proposed rule on emergency prices resembles laws that many states have adopted and that people debate in good faith; the lesson presents arguments on both sides and does not take a position. Score students' reasoning, not the side they choose.
Differentiation Strategies
For Struggling Students
Give a two-column organizer, What is produced and Who gets it, with one row for each source
Provide a frame: "The incentive was ___. It rewarded ___, so producers made more ___. The rule gave the good to ___."
Pre-teach the five glossary terms for Source 1 with a checkerboard sketch of alternate sections
For Advanced Students
Use Source 2 to compute the percent change in production from 2016 to 2019 and compare it with the percent change in price over the same years; discuss what else could explain the gap
Research how the 1864 amendment changed the Pacific Railway Act's land and loan terms, and predict how the change affected construction
Design an allocation rule for Source 3 that keeps the price at $700 but still draws in more generators, and name its weaknesses
Assessment Guidance
What to Look For
Strong answers name the incentive precisely (who is rewarded, for what, and when), trace its effect on what is produced and, separately, on who gets the good, and support both with quotations, calculations or data. They name at least one trade-off or unintended effect and distinguish correlation in data from proof of cause. Watch for three confusions: treating a price as only a cost to buyers rather than a signal to producers; assuming that a rule which leaves the price low also leaves the good available; and reading the Pacific Railway Act's bonds as gifts rather than loans.
02
Classroom Activities
3 Activities
1
Incentive Card Analysis
15 minGroups of 3
Each group draws 8 cards, each describing an incentive. For every card the group writes who responds, what they produce more or less of, who ends up with the good, and one possible unintended effect.
The 8 Incentive Cards (invented)
A city pays a trash contractor by the ton collected.
A bakery marks down day-old bread by 60% after 5 p.m.
A state gives a tax credit to companies that build plants in rural counties.
A theme park sells skip-the-line passes for $80.
A school awards a pizza party to the class that reads the most pages.
An airline lets passengers bid for empty first-class seats.
A hospital pays nurses 1.5 times their wage for extra weekend shifts.
A video game gives bonus coins to players who log in every day.
Sample Answers for the Teacher
Card 1: the contractor collects more tons; an unintended effect may be little interest in recycling programs that reduce tonnage.
Card 4: the park produces a faster ride experience for some; it is distributed by willingness to pay, and regular lines may grow longer.
Card 5: students read more pages; some may choose short, easy books, because the reward counts pages, not learning.
Discussion Questions
Which cards change what is produced, which change who gets it, and which do both?
Pick one card and redesign the incentive to avoid its unintended effect.
Modification for English Learners
Pair each card with a simple icon and provide the frame "___ is rewarded for ___, so they will make more ___."
2
Who Gets the Seats? An Allocation Simulation
20 minWhole class
The class distributes 24 imaginary seats on the last bus out of a snowed-in ski town, using a different rule in each round. Each student gets a card with a reason to leave (a job shift, a flight, a medical appointment, a game) and a budget in play money.
Rounds
First come: the first 24 students to stand get seats at a fixed $20.
Lottery: every student who wants a seat enters; the teacher draws 24 names.
Auction: students bid from their budgets, and the 24 highest bids win. Then announce that a second bus company will add a bus if the winning bids average more than $60.
Need: the class writes a priority rule (for example, medical appointments first) and applies it.
Debrief
Who got seats under each rule? Who was left behind?
Which rule was the only one that could bring a second bus? Why?
Which rule would you choose, and what does it cost the people it leaves out?
Modification for a Shorter Class
Run rounds 1 and 3 only, and discuss rounds 2 and 4 as a class.
3
Incentive Policy Brief
20 minPairs
Pairs write a one-page brief for an invented city council that wants more after-school child care. They propose one incentive, predict what it will make more of and who will get it, and name a risk.
Brief Template
The incentive: who is rewarded, for what, and how much
Predicted effect on what is produced (number of spots, hours, quality)
Predicted effect on distribution (which families get the spots, and by what rule)
One unintended consequence and how to limit it
Evidence: one lesson from Source 1, 2 or 3 that supports the prediction
Discussion Questions
Did any two pairs choose incentives that would distribute the spots to different families?
Which proposal relies most on prices, and which least?
Neutrality Note
The city and its problem are invented. Briefs are scored on the reasoning about incentives, not on which approach a pair favors.
03
Diagrams & Visual Aids
1 diagrams
Diagram 1: U.S. Crude Oil Production and Price, 2005-2025 (Real EIA Data)
Annual U.S. field production of crude oil (top, thousand barrels per day) and the annual average WTI spot price at Cushing, Oklahoma (bottom, dollars per barrel, not adjusted for inflation). Shaded: the years 2011-2014, when the price stayed near $95. Source: U.S. Energy Information Administration, petroleum data series MCRFPUS2 and RWTC, released September 30, 2026.
04
Homework Assignment
~30 min
D2.Eco.3.9-12 Homework: Incentives, Production and Distribution
Directions: Part 1 uses new invented situations. Part 2 uses Sources 1-3 in the lesson plan. Show all calculations and explain your reasoning in complete sentences.
Part 1: Analyzing Incentives (Problems 1-3)
For each incentive, explain what will be produced more or less and who is likely to get it: (a) a city charges $3 an hour more for downtown parking during weekday afternoons; (b) a phone maker gives a $200 trade-in credit for old phones; (c) a summer camp lets families who register before March pay 15% less.
Invented example: a school cafeteria cuts the price of fruit cups from $1.50 to $0.75 and raises the price of chips from $1.25 to $1.75. Daily fruit-cup sales rise from 120 to 210, and chip sales fall from 300 to 220. (a) Find the cafeteria's daily revenue from the two items before and after. (b) How did the change in incentives change what students bought? (c) Name one trade-off for the cafeteria.
Invented example: a high school has 120 parking permits and 300 juniors and seniors who want one. (a) Under a lottery, what is each applicant's chance of a permit, as a percent? (b) Compare a lottery with selling permits to the highest bidders: who gets the permits under each rule, and what does each rule encourage students to do?
Part 2: Using the Sources (Problems 4-6)
Use Source 2. (a) Find the percent change in U.S. crude oil production from 2008 to 2014. (b) Find the percent change in the WTI price from 2014 to 2016. (c) Write two sentences on what these numbers suggest about the price incentive, and name one other factor that could explain the production change.
Use Source 1. Suppose a company finished 80 miles of track on the plains and the 150 miles of the hardest mountain section. (a) How much in bonds would it receive for each part, and in total? (b) If you were rewriting paragraph 4, how would you decide where the mountain sections begin so that companies could not gain by moving the starting points? Explain why your rule changes the incentive.
Write a 6-8 sentence analysis: in Source 3, which response did the most to increase the number of generators in Harlow County, and which did the most to get them to the households that needed them most? Use at least two numbers from the scenario, and address the argument of the side you disagree with.
Rubric
Criterion
Full Credit (2 pts)
Partial Credit (1 pt)
No Credit (0 pts)
Incentive Identified
Names who is rewarded, for what and how
Names the incentive vaguely
No incentive named
Production and Distribution
Analyzes both what is produced and who gets it
Analyzes only one
Neither analyzed
Evidence and Calculations
Problems 2-5 correct with work; data and quotations used accurately
One error or thin evidence
Work or evidence missing
Reasoning
Problem 6 weighs trade-offs and answers the other side fairly
One side only
No reasoning
05
Quiz: 20 Questions
Interactive, with answers
Instructions
Questions 1-5 and 15 use Source 1 (the Pacific Railway Act, 1862) in Guided Practice. Questions 6-9 and 17 use Source 2 (EIA data) in Independent Practice. Questions 10-14, 16, 18 and 19 use Source 3, the invented scenario in Closure. Question 20 uses Sources 1 and 3. Your score updates as you answer, and Reset quiz clears everything.
Multiple choice: pick an option to check it. Short answer: write your answer, then reveal the model answer.
0 of 20 answered · 0 correct
Question 1 of 20 · Multiple Choice
According to Source 1, paragraph 2, which land inside the grant did the company not receive?
Answer: C
The act says "all mineral lands shall be excepted from the operation of this act," while timber on granted land "is hereby granted to said company." Choice A reverses the timber rule. Choice B confuses the excluded land with the checkerboard pattern: the company got odd-numbered sections, and the even ones stayed with the government. Choice D is not in the source.
Question 2 of 20 · Multiple Choice
Use Source 1, paragraphs 3 and 4. How much in bonds per mile did the law provide on the stretch between the two mountain sections?
Answer: A
Paragraph 3 sets sixteen $1,000 bonds a mile, or $16,000. Paragraph 4 makes the stretch between the mountain sections "double the number per mile first mentioned": 2 x $16,000 = $32,000. Choice B is the basic rate. Choice C is the treble mountain rate. Choice D doubles the mountain rate instead of the basic rate.
Question 3 of 20 · Multiple Choice
Paragraph 3 issues bonds only after commissioners certify "forty consecutive miles" complete. What incentive does this create?
Answer: D
The company gets nothing until forty miles in a row are finished and equipped, so it is rewarded for completing continuous track fast. Choice A is the opposite: scattered pieces would earn no bonds. Choice B is not in the source. Choice C misreads the law, which pays a fixed number of bonds per mile, not a share of costs.
Question 4 of 20 · Multiple Choice
The bonds in paragraph 3 pay "six per centum per annum interest." How much interest a year do the bonds for one mile on the plains carry?
Answer: B
One plains mile gets 16 bonds of $1,000, or $16,000; 6% of $16,000 is 0.06 x 16,000 = $960 a year. Because the bonds had to be repaid with interest, they were a loan to the company, not a gift. Choice A slips a decimal place. Choice C is the face value, not the interest. Choice D is the interest on one bond.
Question 5 of 20 · Multiple Choice
Paragraph 2 grants the land "to secure the safe and speedy transportation of the mails, troops, munitions of war, and public stores." What does this stated purpose suggest about why Congress wanted the railroad built quickly in 1862?
Answer: B
Troops, munitions of war and public stores are military and government needs, and in 1862 the Union was fighting the Civil War, so a fast route to the Pacific served the government itself. Choice A is not in the source. Choice C invents a refusal. Choice D is wrong because the act pays for a "railroad and telegraph line" built together.
Question 6 of 20 · Multiple Choice
Use Source 2. By about what percent did U.S. crude oil production rise from 2011 to 2015?
Answer: C
(9,433 - 5,674) / 5,674 = 3,759 / 5,674 = about 0.66, or 66%. Choice A treats the increase of 3,759 thousand barrels a day as a percent. Choice B divides by the 2015 value instead of the starting value. Choice D gives the ratio of the two years (about 1.66) as the percent change.
Question 7 of 20 · Multiple Choice
Use Source 2. From 2019 to 2020 the WTI price fell from $56.99 to $39.16. By how much did production fall?
Answer: B
12,335 - 11,349 = 986 thousand barrels a day. Choice A is the change in price, not production. Choice C adds 1,000 by mistake when subtracting. Choice D is the 2020 level, not the change.
Question 8 of 20 · Multiple Choice
Which conclusion is best supported by Source 2 and the note on drilling methods?
Answer: D
Production rose sharply during 2011-2014 when the price stayed near $95, which fits a price incentive, but new drilling methods also lowered costs, so the data cannot prove the price was the only cause. Choice A fails in 2015, when the price fell by about half while production still rose. Choice B fails in 2009, when the price fell and production rose. Choice C ignores the technology note.
Question 9 of 20 · Multiple Choice
Use Source 2. By about what percent did the WTI price rise from 2021 to 2022?
Answer: A
(94.90 - 68.13) / 68.13 = 26.77 / 68.13 = about 0.39, or 39%. Choice B divides by the 2022 price instead of the 2021 price. Choice C treats the $26.77 change as a percent. Choice D gives the ratio (about 1.39) as the percent change.
Question 10 of 20 · Multiple Choice
In Source 3, which response added generators to the county's supply during the storm?
Answer: B
Tri-County's higher price made it worth paying a driver $1,200 to bring 50 extra generators from 300 miles away. Choice A sold only the 60 already in stock and could not restock that week. Choice C divided the existing 30 differently but did not add any. Choice D sped up repairs, a different product, but brought in no generators.
Question 11 of 20 · Multiple Choice
In Source 3, what was the chance of winning a co-op generator for a member who entered the drawing and did not use medical equipment?
Answer: D
The 6 members with medical equipment go first, leaving 30 - 6 = 24 generators for the other 240 - 6 = 234 entrants: 24 / 234 = about 0.103, or 10.3%. Choice A divides 30 by 240, ignoring the priority rule. Choice B is 6 / 240, the share of entrants with medical equipment. Choice C divides 30 by 234.
Question 12 of 20 · Multiple Choice
Use Source 3. What profit did Dale Ruiz make, counting the truck rental?
Answer: C
He sold 20 generators for $1,000 each ($20,000) after paying $650 each ($13,000) and $900 for the truck: 20,000 - 13,000 - 900 = $6,100. Choice A leaves out the truck. Choice B is his revenue. Choice D is what he paid for the generators.
Question 13 of 20 · Multiple Choice
Under Benson Hardware's rule in Source 3, which households got its generators?
Answer: A
Benson kept the $700 price and sold to "the people at the front of the line," so the rule rewarded being early and nearby, including some buyers from the next county. Choice B describes the co-op's priority rule. Choice C describes Tri-County's higher price. Choice D describes the co-op's drawing.
Question 14 of 20 · Multiple Choice
How did the power company's overtime pay in Source 3 influence what was produced?
Answer: D
Overtime pay of 1.5 times the usual wage, plus crews from three other states, increased the repair work supplied, and power was back "in four days instead of five." The incentive changed the production of a service, not of generators. Choices A and B are not in the source. Choice C is an indirect effect at most: homes needed generators for a shorter time, not fewer of them during the outage.
Question 15 of 20 · Short Answer
Paragraph 2 of Source 1 says land the company has not sold within three years after the road is finished must be opened to settlers at no more than $1.25 an acre. Explain how this rule changes the company's incentives and who the rule was meant to get the land.
Model answer: Without the rule the company could hold the land for years, waiting for its value to rise. The three-year deadline and the $1.25 cap give it a reason to sell soon, and if it does not, settlers can claim the land cheaply. The rule was meant to move the land to farm families along the line, who would also become railroad customers. Rubric: 1 point for the effect on the company's incentive; 1 point for who was meant to get the land, tied to the paragraph.
Question 16 of 20 · Short Answer
Use Source 3. Tri-County Supply sold all 90 of its generators at $1,050. Find its total revenue and the shipping cost for each of the 50 extra generators. Then explain how the higher price acted as an incentive to bring them in.
Model answer: 90 x $1,050 = $94,500. Shipping: $1,200 / 50 = $24 a generator. The extra $350 above the usual $700 price was far more than the $24 shipping cost, so the higher price made the trip worth it; at $700 the owner might not have bothered. Rubric: 1 point for both numbers; 1 point for explaining the incentive.
Question 17 of 20 · Short Answer
Use Source 2. Find the percent change in production and in price from 2020 to 2023. What do the two numbers together suggest about how producers respond to price?
Model answer: Production: (12,972 - 11,349) / 11,349 = about 14.3%. Price: (77.58 - 39.16) / 39.16 = about 98.1%. The price nearly doubled while production rose more slowly, which suggests producers respond to higher prices but need time and money to drill new wells, so the response is smaller and slower than the price change. Rubric: 1 point for both percents (accept 14% and 98%); 1 point for a reasoned interpretation.
Question 18 of 20 · Short Answer
The proposed rule in Source 3 would limit price increases to 10% during an emergency. What would the highest allowed generator price be? Analyze one likely effect of the rule on how many generators reach the county and one on who gets them.
Model answer: 1.10 x $700 = $770. Production: at $770, a seller gains only $70 above normal for each extra generator, so a costly trip like Tri-County's or Dale's is less attractive, and fewer generators may arrive. Distribution: buyers at the front of a line or with connections get the generators at a price more families can afford, rather than those willing to pay most. Supporters weigh fairness and affordability; opponents weigh lost supply. Rubric: 1 point for $770; 1 point for a production effect; 1 point for a distribution effect.
Question 19 of 20 · Short Answer
Compare the co-op's drawing with Tri-County Supply's higher price in Source 3. Who gets generators under each rule? Give one strength and one weakness of each.
Model answer: The co-op gives generators first to members with medical equipment and then to random winners at $700; a strength is that need and fairness count, and a weakness is that it adds no generators and outsiders cannot buy. Tri-County gives them to buyers willing and able to pay $1,050; a strength is that the price brought in 50 more, and a weakness is that families with less money may be shut out. Rubric: 1 point for who gets them under each; 1 point for a strength and a weakness of each.
Question 20 of 20 · Short Answer
In both Source 1 and Source 3, someone offered a reward for producing something quickly. Compare who created each incentive and one unintended effect each could have.
Model answer: In Source 1, Congress created the incentive: land and bonds per finished mile, with triple bonds in the mountains, which gave companies a reason to build fast and to argue that the mountains began early. In Source 3, the market price and the power company's overtime pay created incentives: high prices drew in generators but made them costly, and overtime could tire crews or raise the company's costs, which customers may later pay. Rubric: 1 point for who created each; 1 point for a plausible unintended effect for each.
0 of 20 answered · 0 correct
06
Frequently Asked Questions
10 Questions
What does D2.Eco.3.9-12 mean?
D2.Eco.3.9-12 asks high school students to analyze how incentives shape what a market system produces and how those goods and services are distributed. The full text is "Analyze the ways in which incentives influence what is produced and distributed in a market system." It sits in the Exchange and Markets part of the C3 Framework's economics standards for grades 9-12.
What is the difference between "produced" and "distributed" in D2.Eco.3.9-12?
Produced is about which goods and services get made and how much of each. Distributed is about who ends up with them. The same incentive can affect both: a high price can pull in more supply and also send the existing supply to the buyers willing to pay the most. Good answers on this standard analyze the two effects separately.
Are prices the only incentives in a market system?
No. Prices and profits are the main ones, but wages, bonuses, piece rates, subsidies, taxes, loans, deadlines, rankings and even praise are incentives too. Governments and organizations often add incentives to markets, and each one rewards some behavior and not others.
Why does this lesson use an 1862 railroad law?
The Pacific Railway Act is a clear, well-documented case of a government designing incentives on purpose: it offered land and loans for each finished stretch of track and higher loans for harder miles. Students can see how a rule written to speed up production changed what companies did, who received the land, and what effects nobody planned.
Is the oil data on this page real?
Yes. Source 2 is annual data from the U.S. Energy Information Administration, a federal agency, and the page names the two data series and their release date. The prices are not adjusted for inflation. The ice-storm scenario and the worked examples marked invented are not real data.
Does a higher price always lead to more production?
Not right away. Producers often need time and money to build, plant or drill, so output may respond months or years after a price change, and sometimes it does not respond much at all. The lesson's real data let students look for that delay themselves.
Is it fair for sellers to raise prices in an emergency?
People disagree, and the lesson does not take a side. One view stresses that high prices bring in more supply and send it where it is valued most; another stresses affordability and fairness for families with less money. Many states have laws on emergency pricing. Students analyze the incentives on both sides and are scored on their reasoning, not their position.
How is D2.Eco.3.9-12 different from D2.Eco.3.6-8?
The grades 6-8 indicator asks students to explain the roles of buyers and sellers in product, labor and financial markets. The grades 9-12 indicator moves from describing roles to analyzing why markets produce what they do and who gets it, with incentives as the explanation.
Which economics course usually covers D2.Eco.3.9-12?
It is usually taught in a high school economics course, often a one-semester class in grade 11 or 12, near the start, alongside supply and demand. It also fits U.S. History units on railroads and western settlement and government courses that study how laws shape markets.
What is a good quick check for D2.Eco.3.9-12?
Describe a new incentive, such as a city paying a bonus for each new apartment built near a train station, and ask students for its likely effect on what is produced, its effect on who gets the result, and one unintended consequence. Students who address all three with a reason are meeting the indicator.
07
Related Standards
5 standards
These standards connect to D2.Eco.3.9-12: prerequisites to review first, parallel standards at the same level, and next steps that build on it.
Before this lesson
D2.Eco.3.6-8Prerequisite
Explain the roles of buyers and sellers in product, labor and financial markets
Describe intended and unintended consequences of policies to improve market outcomes
Lesson coming soon
Standard text: National Council for the Social Studies (NCSS), The College, Career, and Civic Life (C3) Framework for Social Studies State Standards: Guidance for Enhancing the Rigor of K-12 Civics, Economics, Geography, and History (Silver Spring, MD: NCSS, 2013). NCSS was not involved in the production of this lesson and does not endorse it.
