Question 1

If Joey Kobayashi experiences diminishing marginal utility from eating hot dogs then

Accepted Answer

A)  his total utility from eating hot dogs is negative. 
B)  the marginal utility from the next hot dog Joey eats will be negative. 
C)  the additional satisfaction he receives from eating another hot dog will be less then the satisfaction he received from his eating his last hot dog. 
D)  Joey is maximizing the marginal utility per dollar he receives from eating hot dogs. 
A)  his total utility from eating hot dogs is negative. 
B)  the marginal utility from the next hot dog Joey eats will be negative. 
C)  the additional satisfaction he receives from eating another hot dog will be less then the satisfaction he received from his eating his last hot dog. 
D)  Joey is maximizing the marginal utility per dollar he receives from eating hot dogs.

Question 2

Some economists have suggested that network externalities result in consumers being locked into the use of products with inferior technologies. Economists Stan Leibowitz and Stephen Margolis have studied cases that have been cited as examples of this and found

Accepted Answer

A)  there is no convincing evidence that the alternative technologies were superior. 
B)  consumers sometimes do become locked into the use of products with inferior technologies. 
C)  that in all of these cases network externalities resulted in market failure. 
D)  that consumers use products with inferior technologies when their prices are lower than products with superior technologies. 
A)  there is no convincing evidence that the alternative technologies were superior. 
B)  consumers sometimes do become locked into the use of products with inferior technologies. 
C)  that in all of these cases network externalities resulted in market failure. 
D)  that consumers use products with inferior technologies when their prices are lower than products with superior technologies.

Question 3

The law of diminishing marginal utility states that

Accepted Answer

A)  eventually total utility falls as more of a good is consumed, other things constant. 
B)  the extra satisfaction from consuming a good decreases as more of a good is consumed, other things constant. 
C)  the extra satisfaction from consuming a good increases slowly as more of a good is consumed, other things constant. 
D)  when the extra satisfaction from consuming a good becomes negative, total utility starts falling, other things constant. 
A)  eventually total utility falls as more of a good is consumed, other things constant. 
B)  the extra satisfaction from consuming a good decreases as more of a good is consumed, other things constant. 
C)  the extra satisfaction from consuming a good increases slowly as more of a good is consumed, other things constant. 
D)  when the extra satisfaction from consuming a good becomes negative, total utility starts falling, other things constant.

Question 4

If Callum is consuming his utility maximizing bundle and the price of one good rises, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Callum do?

Accepted Answer

A)  MU/P has increased and Callum should buy more of this good. 
B)  MU/P has increased and Callum should buy less of this good. 
C)  MU/P has decreased and Callum should buy more of this good. 
D)  MU/P has decreased and Callum should buy less of this good. 
A)  MU/P has increased and Callum should buy more of this good. 
B)  MU/P has increased and Callum should buy less of this good. 
C)  MU/P has decreased and Callum should buy more of this good. 
D)  MU/P has decreased and Callum should buy less of this good.

Question 5

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then Marlowe

Accepted Answer

A)  is maximizing total utility. 
B)  should buy more apples and fewer oranges. 
C)  should buy more oranges and fewer apples. 
D)  should buy fewer oranges and fewer apples. 
A)  is maximizing total utility. 
B)  should buy more apples and fewer oranges. 
C)  should buy more oranges and fewer apples. 
D)  should buy fewer oranges and fewer apples.

Question 6

The substitution effect of an increase in the price of Raisin Bran refers to

Accepted Answer

A)  the decrease in the demand for Raisin Bran when its price rises. 
B)  the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left. 
C)  the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant. 
D)  the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran. 
A)  the decrease in the demand for Raisin Bran when its price rises. 
B)  the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left. 
C)  the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant. 
D)  the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran.

Question 7

The only Giffen goods that have been identified so far in the real world are luxury goods.

Accepted Answer

A) True 
 B)False

Question 8

What is marginal utility and what is the law of diminishing marginal utility?

Accepted Answer

Marginal utility is the change in total

Question 9

The demand curve for a Giffen good is

Accepted Answer

A)  non-linear but downward sloping. 
B)  vertical. 
C)  upward sloping. 
D)  non-existent. 
A)  non-linear but downward sloping. 
B)  vertical. 
C)  upward sloping. 
D)  non-existent.

Question 10

All of the following products are likely to have significant network externalities except

Accepted Answer

A)  cat food. 
B)  cell phones. 
C)  popular board games. 
D)  Twitter. 
A)  cat food. 
B)  cell phones. 
C)  popular board games. 
D)  Twitter.

Question 11

Identify the one statement that does not demonstrate how social effects influence consumer choice.

Accepted Answer

A)  Students in an Economics class are required to purchase a textbook assigned by the professor. 
B)  There is utility gained from consuming goods or services that others are consuming. 
C)  Some products that people consume are determined by the social popularity of the products. 
D)  Companies such as Zappos.com and Netflix invite their consumers to write reviews about their experience with their products which are then posted on the internet for others to see. 
A)  Students in an Economics class are required to purchase a textbook assigned by the professor. 
B)  There is utility gained from consuming goods or services that others are consuming. 
C)  Some products that people consume are determined by the social popularity of the products. 
D)  Companies such as Zappos.com and Netflix invite their consumers to write reviews about their experience with their products which are then posted on the internet for others to see.

Question 12

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 rises to $30 while income and the price of Yoga sessions remain unchanged. What is her new optimal bundle?

Accepted Answer

A)  still remains at bundle A. 
B)  bundle B. 
C)  bundle C. 
D)  bundle D. 
A)  still remains at bundle A. 
B)  bundle B. 
C)  bundle C. 
D)  bundle D.

Question 13

Molly received an autographed poster of David Hasselhoff for her 21st birthday. Her friend Helga offered her $50 for the poster, but Molly refused to sell the poster even though she knows she would never pay that much to replace it if it was ever damaged or destroyed. Explain this inconsistency in Molly's behavior.

Accepted Answer

The inconsistency comes from Molly's fai

Question 14

The observation that people tend to value something more highly when they own it than when they don't is called the

Accepted Answer

A)  wealth effect. 
B)  endowment effect. 
C)  path-dependent effect. 
D)  endorsement effect. 
A)  wealth effect. 
B)  endowment effect. 
C)  path-dependent effect. 
D)  endorsement effect.

Question 15

An item has utility for a consumer if it

Accepted Answer

A)  is scarce. 
B)  has a high price. 
C)  is something everyone else wants. 
D)  generates enjoyment or satisfaction. 
A)  is scarce. 
B)  has a high price. 
C)  is something everyone else wants. 
D)  generates enjoyment or satisfaction.

Question 16

The additional utility that George receives from consuming one more slice of pizza is called

Accepted Answer

A)  average utility. 
B)  marginal utility. 
C)  total utility. 
D)  diminishing utility. 
A)  average utility. 
B)  marginal utility. 
C)  total utility. 
D)  diminishing utility.

Question 17

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is maximized.

Accepted Answer

A) True 
 B)False

Question 18

The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears. To maximize his utility, what should Harold do?

Accepted Answer

A)  He should acquire more income so that he can afford to buy more oranges and pears. 
B)  He should reduce his consumption of both oranges and pears so that he can buy a greater variety of goods. 
C)  He should buy fewer pears and more oranges. 
D)  He should buy fewer oranges and more pears. 
A)  He should acquire more income so that he can afford to buy more oranges and pears. 
B)  He should reduce his consumption of both oranges and pears so that he can buy a greater variety of goods. 
C)  He should buy fewer pears and more oranges. 
D)  He should buy fewer oranges and more pears.

Question 19

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

Accepted Answer

A) True 
 B)False

Question 20

If a consumer always buys goods rationally, then

Accepted Answer

A)  the total utilities of the different goods consumed will be equal. 
B)  the average utilities of the different goods consumed will be equal. 
C)  the marginal utility per dollar spent on all goods will be equal. 
D)  the marginal utility of the different goods consumed will be equal. 
A)  the total utilities of the different goods consumed will be equal. 
B)  the average utilities of the different goods consumed will be equal. 
C)  the marginal utility per dollar spent on all goods will be equal. 
D)  the marginal utility of the different goods consumed will be equal.

Exam 10: Consumer Choice and Behavioral Economics

If Joey Kobayashi experiences diminishing marginal utility from eating hot dogs then

Some economists have suggested that network externalities result in consumers being locked into the use of products with inferior technologies. Economists Stan Leibowitz and Stephen Margolis have studied cases that have been cited as examples of this and found

The law of diminishing marginal utility states that

If Callum is consuming his utility maximizing bundle and the price of one good rises, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Callum do?

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then Marlowe

The substitution effect of an increase in the price of Raisin Bran refers to

The only Giffen goods that have been identified so far in the real world are luxury goods.

What is marginal utility and what is the law of diminishing marginal utility?

The demand curve for a Giffen good is

All of the following products are likely to have significant network externalities except

Identify the one statement that does not demonstrate how social effects influence consumer choice.

The observation that people tend to value something more highly when they own it than when they don't is called the

An item has utility for a consumer if it

The additional utility that George receives from consuming one more slice of pizza is called

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is maximized.

The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears. To maximize his utility, what should Harold do?

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

If a consumer always buys goods rationally, then

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

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Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

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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

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Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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Unemployment and Inflation

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Monetary Policy

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Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

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