Question 1

Figure 10-1  
-Refer to Figure 10-1. Which of the following statements is true?

Accepted Answer

A)  Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B)  Quantities Q0 and Q1 may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C)  Quantity Q0 could be a utility-maximizing choice if the price is $5.75, but quantity Q1 may not be because we have no information on the marginal utility per dollar when price changes. 
D)  Quantities Q0 and Q1 are derived independently of the utility-maximizing model. 
A)  Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B)  Quantities Q0 and Q1 may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C)  Quantity Q0 could be a utility-maximizing choice if the price is $5.75, but quantity Q1 may not be because we have no information on the marginal utility per dollar when price changes. 
D)  Quantities Q0 and Q1 are derived independently of the utility-maximizing model.

Question 2

List three reasons why the demand for a product will often increase if the product is endorsed by a celebrity.

Accepted Answer

1. Consumers may believe that the celebr

Question 3

A study discussed in the Making the Connection feature in the text found that there is ________ that some consumers are not well aware of prices, even for goods they buy regularly.

Accepted Answer

A)  no evidence 
B)  substantial evidence 
C)  little evidence 
D)  no reason to believe 
A)  no evidence 
B)  substantial evidence 
C)  little evidence 
D)  no reason to believe

Question 4

Figure 10-8   Manuri has $300 to spend on Pilates classes and Yoga classes. The price of a group Pilates class is $20 and the price of a group Yoga class is $10. Manuri's optimal bundle is given by "A" in Figure 10-8.
-Refer to Figure 10-8. Suppose the price of Pilates sessions rise to $30 while income and the price of Yoga sessions remain unchanged. The substitution effect of this price change is represented by the movement from

Accepted Answer

A)  A to B. 
B)  A to C. 
C)  A to D. 
D)  D to B. 
A)  A to B. 
B)  A to C. 
C)  A to D. 
D)  D to B.

Question 5

All but one of the following have been suggested by some economists as possible consequences of path dependency and switching costs. Which of the following is not a possible consequence of path dependency and switching costs?

Accepted Answer

A)  Consumers may get locked into using products with inferior technology. 
B)  market failure 
C)  diseconomies of scale 
D)  Government intervention may be necessary in affected markets in order to improve economic efficiency. 
A)  Consumers may get locked into using products with inferior technology. 
B)  market failure 
C)  diseconomies of scale 
D)  Government intervention may be necessary in affected markets in order to improve economic efficiency.

Question 6

In 2016, the most profit from the musical Hamilton went to

Accepted Answer

A)  the musical's star and creator, Lin-Manuel Miranda. 
B)  the musical's producers. 
C)  the owners of the Richard Rodgers Theater where the musical is performed. 
D)  scalpers. 
A)  the musical's star and creator, Lin-Manuel Miranda. 
B)  the musical's producers. 
C)  the owners of the Richard Rodgers Theater where the musical is performed. 
D)  scalpers.

Question 7

Figure 10-7   The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy.
-Refer to Figure 10-7. A change in income is shown in

Accepted Answer

A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  none of the above panels. 
A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  none of the above panels.

Question 8

Lilly Davis has $5 per week to spend on any combination of ice cream and candy. The price of an ice cream cone is $2 and the price of a candy bar is $1. The table below shows Lilly's utility values. Use the table to answer the questions that follow the table.
   a. Complete the table by filling in the blank spaces.
b. Suppose Lilly purchases 2 ice cream cones and 1 candy bar. Is she consuming the optimal consumption bundle? If so, explain why. If not, what combination should she buy and why?

Accepted Answer

a.
 @#IMG-DLM& b. If Lilly purchases 2 ice cream c

Question 9

Harvey Miller owns a baseball that was hit for a home run by Ted Williams. Harvey, a long-time Boston Red Sox fan, recently refused to sell his baseball for $75,000 even though he would not have paid someone more than $10,000 for the baseball if he did not already own it. Harvey explained his decision not to sell the baseball by noting that: "Ted Williams was my hero. This baseball has a great deal of sentimental value for me." Which of the following can explain Harvey's behavior?

Accepted Answer

A)  the difference between implicit and explicit costs 
B)  the scarcity of home run baseballs hit by Ted Williams 
C)  the endowment effect 
D)  how social influences can affect consumption choices 
A)  the difference between implicit and explicit costs 
B)  the scarcity of home run baseballs hit by Ted Williams 
C)  the endowment effect 
D)  how social influences can affect consumption choices

Question 10

What is the endowment effect?

Accepted Answer

A)  the phenomenon that economic agents are endowed with different qualities and abilities so that trade among individuals increase efficiency 
B)  the tendency for economic agents with abundant resources to consume a proportionately greater quantity of goods and services 
C)  the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it. 
D)  the tendency of firms to use celebrities endowed with good looks to promote their products 
A)  the phenomenon that economic agents are endowed with different qualities and abilities so that trade among individuals increase efficiency 
B)  the tendency for economic agents with abundant resources to consume a proportionately greater quantity of goods and services 
C)  the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it. 
D)  the tendency of firms to use celebrities endowed with good looks to promote their products

Question 11

Table 10-6
   Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 10-6. What is Jay's optimal consumption bundle?

Accepted Answer

A)  1 burger and 2 cans of Pepsi 
B)  2 burgers and 3 cans of Pepsi 
C)  3 burgers and 1 can of Pepsi 
D)  3 burgers and 2 cans of Pepsi 
A)  1 burger and 2 cans of Pepsi 
B)  2 burgers and 3 cans of Pepsi 
C)  3 burgers and 1 can of Pepsi 
D)  3 burgers and 2 cans of Pepsi

Question 12

Farah has $100 to spend each month on bread and chicken. Suppose the price of bread is $4 a loaf and the price of chicken is $5 per pound.
a. Draw her budget constraint and label it BC0. Put bread on the horizontal axis and chicken on the vertical axis. Be sure to identify the intercept values.
b. Suppose Farah is a utility maximizer and she consumes 10 loaves of bread and 12 pounds of chicken. On the same graph you drew in part (a), draw an indifference curve to identify her optimal bundle. Label this bundle "E."
c. Is her budget exhausted? Verify your answer.
d. Now suppose Farah's income falls to so that she can now devote $80 to the two goods. Prices however remain unchanged. In the same diagram, graph her new budget constraint and label it BC1. Be sure to identify any new intercept values.
e. Following the change in income, can Farah consume the same bundle "E"? Explain your answer.
f. What must happen to her total utility following the decrease in her income?

Accepted Answer

a. See the figure below
b. See the figur

Question 13

If total utility increases at a decreasing rate as a consumer consumes more coffee, then marginal utility must

Accepted Answer

A)  remains constant. 
B)  increase also. 
C)  decrease. 
D)  be negative. 
A)  remains constant. 
B)  increase also. 
C)  decrease. 
D)  be negative.

Question 14

Table 10-6
   Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 10-6. If Jay can eat all the burgers he wants for free, how many burgers will he consume?

Accepted Answer

A)  7 burgers 
B)  6 burgers 
C)  5 burgers 
D)  3 burgers 
A)  7 burgers 
B)  6 burgers 
C)  5 burgers 
D)  3 burgers

Question 15

An economist observes two consumers in a supermarket. One of the consumers buys a case of Coca-Cola and the other buys a case of Pepsi-Cola. Both colas sell for the same price and the ages and incomes of the consumers are also the same. Based on this information, how would the economist explain the consumers' choices?

Accepted Answer

A)  One of the consumers made the wrong choice, but it is impossible to say which one. 
B)  Both consumers should have considered buying other colas that had lower prices. 
C)  Both consumers should have purchased less than a case because they would be able to buy more later. 
D)  Apparently, the consumers had different tastes. 
A)  One of the consumers made the wrong choice, but it is impossible to say which one. 
B)  Both consumers should have considered buying other colas that had lower prices. 
C)  Both consumers should have purchased less than a case because they would be able to buy more later. 
D)  Apparently, the consumers had different tastes.

Question 16

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

Accepted Answer

A) True 
 B)False

Question 17

Utility is

Accepted Answer

A)  easily measured in units called utils. 
B)  subjective and difficult to measure. 
C)  the consumption of a quasi-public good like electricity or natural gas. 
D)  the production of a quasi-public good like electricity or natural gas. 
A)  easily measured in units called utils. 
B)  subjective and difficult to measure. 
C)  the consumption of a quasi-public good like electricity or natural gas. 
D)  the production of a quasi-public good like electricity or natural gas.

Question 18

Table 10-5
  
-Refer to Table 10-5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos. Assume that the price of a sub sandwich is $4 and the price of a taco is $2. When Harry's income is $14, he buys two Italian sub sandwiches and three tacos. The last column lists the values of the marginal utility per dollar for tacos when the price of a taco decreases to $1. Complete this statement: As a result of the change in price

Accepted Answer

A)  Harry's purchasing power has increased. He will reduce his consumption of tacos so he can buy one more sub. This is an example of the substitution effect of a price change. 
B)  Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy fewer tacos. This is an example of the income effect of a price change. 
C)  Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy more tacos. This is an example of the income effect of a price change. 
D)  Harry's purchasing power has increased. Harry buys fewer tacos. This is an example of the substitution effect of a price change 
A)  Harry's purchasing power has increased. He will reduce his consumption of tacos so he can buy one more sub. This is an example of the substitution effect of a price change. 
B)  Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy fewer tacos. This is an example of the income effect of a price change. 
C)  Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy more tacos. This is an example of the income effect of a price change. 
D)  Harry's purchasing power has increased. Harry buys fewer tacos. This is an example of the substitution effect of a price change

Question 19

Figure 10-6  
-Refer to Figure 10-6. Which of the following statements is true?

Accepted Answer

A)  The consumer gets more utility from bundle r than from bundle v. 
B)  The consumer gets less utility from bundle w than from bundle v. 
C)  Bundles r, s, t, and u all cost the same. 
D)  Bundles r and w are not affordable. 
A)  The consumer gets more utility from bundle r than from bundle v. 
B)  The consumer gets less utility from bundle w than from bundle v. 
C)  Bundles r, s, t, and u all cost the same. 
D)  Bundles r and w are not affordable.

Question 20

An increase in income results in an outward shift of an indifference curve.

Accepted Answer

A) True 
 B)False

Exam 10: Consumer Choice and Behavioral Economics

Figure 10-1 -Refer to Figure 10-1. Which of the following statements is true?

List three reasons why the demand for a product will often increase if the product is endorsed by a celebrity.

A study discussed in the Making the Connection feature in the text found that there is ________ that some consumers are not well aware of prices, even for goods they buy regularly.

All but one of the following have been suggested by some economists as possible consequences of path dependency and switching costs. Which of the following is not a possible consequence of path dependency and switching costs?

In 2016, the most profit from the musical Hamilton went to

Figure 10-7 The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy. -Refer to Figure 10-7. A change in income is shown in

What is the endowment effect?

Table 10-6 Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1. -Refer to Table 10-6. What is Jay's optimal consumption bundle?

If total utility increases at a decreasing rate as a consumer consumes more coffee, then marginal utility must

Table 10-6 Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1. -Refer to Table 10-6. If Jay can eat all the burgers he wants for free, how many burgers will he consume?

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

Utility is

Figure 10-6 -Refer to Figure 10-6. Which of the following statements is true?

An increase in income results in an outward shift of an indifference curve.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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