The resources that we can use to satisfy our needs and desires are available only in limited quantities. They fall short of the amounts required to fully satisfy all our needs and desires. This is true not only for individuals but also for all societies. Scarcity refers to society’s inability to produce all the goods and services people desire to have due to resource  limitations. This give rise to a choice problem: How should individuals and societies decide on their priorities and manage their scarce resources accordingly with the priorities they set.

In economics, decision makers make decisions by thinking at the margin. Thinking at the margin requires recognizing the need to make decisions by evaluating the costs and benefits of marginal changes. It means that a decision maker should compare his/her action’ marginal benefit and marginal cost. Any action should be undertaken only if the benefit is greater than the cost. If people make choices by comparing cost and benefits, then their decisions may be altered by altering the cost or benefits of their actions. People do respond to positive and negative incentives. When there is a significant increase in the price of gasoline, for instance, demand for public transportation and the demand for smaller, more fuel-efficient cars increase. The term a market failure occurs when the market falls short of allocating resources efficiently. This factor would not explain the reason for that decision.

As it can be understood from the information given, the correct answer is “C”.