In sociology, there is a concept known as perverse incentives - these

Official Explanation

We need to consider a scenario where the government has reclassified events of false advertising from a misdemeanor to a felony, significantly increasing the penalty associated with the crime. For this scenario, we need to select situation X and situation Y such that, if the government’s action was to discourage X but inadvertently encouraged Y, the combined situation would best illustrate the concept of perverse incentives.

A. Since the government increased penalties associated with the crime of false advertising, we can logically conclude that it did not intend to discourage instances of false advertising serious enough to warrant jail time; thus, this is not the correct answer choice for the X column. There is also no information provided to conclude that increasing the penalty associated with the crime would encourage instances of false advertising serious enough to warrant jail time. Thus, this is also not the correct answer choice for the Y column.

B. Since the government's actions have increased the penalties associated with instances of false advertising, one can logically conclude that the government aimed to discourage businesses from engaging in false advertising. If businesses engage in record manipulation to conceal false advertising and avoid these penalties, then this would be an example of a situation that was inadvertently caused due to the increase in penalties for false advertising, making the process of discouraging businesses from engaging in false advertising more complicated.

Hence, “Businesses indulging in record fudging to hide false advertising” is the correct answer choice for the Y column.

C. There is no information provided to suggest the government intended to increase the time taken to prosecute false advertising; thus, this is not the correct answer choice for the X column. There is also no information provided to conclude that increasing the penalty associated with the crime would increase the time taken to prosecute false advertising. Thus, this is also not the correct answer choice for the Y column.

D. Since the government’s actions increased the penalty associated with events of false advertising, one can logically conclude that the government aimed to discourage businesses from misleading consumers.

Hence, “Businesses from misleading consumers” is the correct answer choice for the X column.

E. Since the government’s actions increased the penalty associated with events of false advertising, one can conclude that the government would prefer businesses comply with the law; thus, businesses complying with the law is not a situation that the government intended to discourage. Further, as the government would prefer that businesses follow the law, we can reasonably conclude that their doing so cannot be described as a situation that was inadvertently encouraged due to the government’s actions.

Hence, D is the correct answer choice for the X column, and B is the correct answer choice for the Y column.