Exam 10: Consumer Choice and Behavioral Economics

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of

Which of the following is not a common mistake made by consumers?

Marv Pilson has $50 worth of groceries in a shopping cart at his local Shop 'n Save. Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv's cart equals 50. The marginal utility per dollar of the boxes of cereal in Marv's cart equals 20. Marv has only $50 to spend, but has not yet paid for his groceries. How can Marv increase his total utility without spending more than $50?

A budget constraint

If marginal utility of apples is diminishing and is a positive amount, consuming one more apple will cause

Consider a downward-sloping demand curve. When the price of an inferior good increases, the income and substitution effects

Figure 10-4 -Refer to Figure 10-4. Best friends Laurel and Hardy, both enjoy watching romantic comedies and science fiction movies. Based on the diagrams above what can you conclude about their movie preferences?

A sunk cost is

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00. Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant. Toni's actions are explained by which of the following?

Each price-quantity combination on a consumer's demand curve shows the utility-maximizing quantity at the given price.

Which of the following is not a characteristic of indifference curves?

The amount of income a consumer has to spend on goods and services is known as

In 2016, the face value of tickets to the Broadway musical Hamilton was

The slope of an indifference curve

Behavioral economics refers to the study of situations

Marge buys 5 CDs and 7 DVDs. The marginal utility of the 5th CD and the marginal utility of the 7th DVD are both equal to 30 utils. Can we say that this is the optimal combination of CDs and DVDs for Marge?

Marginal utility is the

Table 10-4 -Refer to Table 10-4. For steak and cheese sandwiches and grilled chicken sandwiches, the table contains the values of the marginal utility (MU) and marginal utility per dollar (MU/P) for Mabel Jarvis. Mabel has $14 to spend on steak and cheese sandwiches and grilled chicken sandwiches. Which of the following statements is true?

An advantage of Microsoft Windows is its compatibility with the widest range of hardware and software. The dominance of Windows is self-reinforcing: hardware and software manufacturers ensure that their products are compatible with Windows in order to have access to the large number of Windows users. Which situation best describes this scenario?

Article Summary The use of celebrities endorsements can be a good way to promote a brand, as long as the brand fits the celebrity. The article discusses three reasons why a company should use celebrity endorsements: 1. Celebrities have a large range of followers, giving them the ability to build brand equity which created product differentiation to consumers. 2. Companies can reach a global audience since celebrities have worldwide fan bases, and an endorsement can link the product to a celebrity's skills, making fans feel closer to and more like the celebrity. 3. Celebrity endorsements increase consumers' awareness of a product, since consumers are more likely to remember an ad linked to a celebrity. However, not all celebrities are the right fit for all products. Endorsements can backfire if the celebrities are promoting something they would never use, giving the impression of nothing more than a sponsored advertisement. -Refer to the Article Summary. Economists refer to an increase in sales due to celebrity endorsements as being the result of