Question 1

Exhibit 20-4
  
-Refer to Exhibit 20-4. What value goes in blank (B)?

Accepted Answer

A) 145 
B) 48.3 
C) 45 
D) 100 
E) There is not enough information to answer this question. 
A) 145 
B) 48.3 
C) 45 
D) 100 
E) There is not enough information to answer this question.

Question 2

Economists David Zizzo and Andrew Oswald found that the majority of their study participants made themselves worse off in order to make someone else worse off.

Accepted Answer

A) True 
 B)False

Question 3

Exhibit 20-1
  
-Refer to Exhibit 20-1. In this example, marginal utility

Accepted Answer

A) constantly increases. 
B) constantly diminishes. 
C) increases then diminishes. 
D) diminishes then increases. 
A) constantly increases. 
B) constantly diminishes. 
C) increases then diminishes. 
D) diminishes then increases.

Question 4

The __________ one's income, the __________ one's budget constraint.

Accepted Answer

A) smaller; further away from the origin 
B) larger; closer to the origin 
C) larger; further away from the origin 
D) smaller; steeper the slope of 
E) larger; steeper the slope of 
A) smaller; further away from the origin 
B) larger; closer to the origin 
C) larger; further away from the origin 
D) smaller; steeper the slope of 
E) larger; steeper the slope of

Question 5

Consider two options: (A) you receive a guaranteed payment of $100; (B) a coin is tossed and if heads comes up, you win nothing; if tails comes up, you win $200. The expected payoff for option A is:

Accepted Answer

A) $200 
B) $100 
C) $300 
D) $75 
E) There is not enough information to answer the question. 
A) $200 
B) $100 
C) $300 
D) $75 
E) There is not enough information to answer the question.

Question 6

Marginal utility is always a positive number.

Accepted Answer

A) True 
 B)False

Question 7

Suppose you are eating buffalo wings at a local happy hour. The total utils from doing so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 150, respectively. The marginal utility of the sixth wing is __________ utils.

Accepted Answer

A) 14 
B) 136 
C) 20 
D) 22.7 
A) 14 
B) 136 
C) 20 
D) 22.7

Question 8

Exhibit 20-8
​
  
-Refer to Exhibit 20-8. If the price of good X rises, the budget constraint moves from budget constraint

Accepted Answer

A) 1 to 2. 
B) 2 to 3. 
C) 3 to 1. 
D) 1 to 3. 
E) a or c 
A) 1 to 2. 
B) 2 to 3. 
C) 3 to 1. 
D) 1 to 3. 
E) a or c

Question 9

The absolute value of the slope of the budget constraint is also known as the marginal rate of substitution.

Accepted Answer

A) True 
 B)False

Question 10

Indifference curves are generally downward sloping and concave to the origin.

Accepted Answer

A) True 
 B)False

Question 11

If total utility of a good is high while the price of the good is low, it is likely that the good

Accepted Answer

A) is plentiful. 
B) is inferior. 
C) is rare. 
D) has high marginal utility. 
A) is plentiful. 
B) is inferior. 
C) is rare. 
D) has high marginal utility.

Question 12

Which of the following statements does not invoke interpersonal utility comparisons?

Accepted Answer

A) The total utility a millionaire derives from $100 is less than the total utility a poor person derives from $100. 
B) The marginal utility a millionaire derives from the one-millionth dollar is less than the marginal utility a poor person derives from the one-hundredth dollar. 
C) For both the millionaire and the pauper, the marginal utility they derive from the one-thousandth dollar is less than the marginal utility they derive from the five-hundredth dollar. 
D) None of the above, because all rely on interpersonal utility comparisons. 
A) The total utility a millionaire derives from $100 is less than the total utility a poor person derives from $100. 
B) The marginal utility a millionaire derives from the one-millionth dollar is less than the marginal utility a poor person derives from the one-hundredth dollar. 
C) For both the millionaire and the pauper, the marginal utility they derive from the one-thousandth dollar is less than the marginal utility they derive from the five-hundredth dollar. 
D) None of the above, because all rely on interpersonal utility comparisons.

Question 13

The budget constraint cuts the horizontal axis at 12 units of good X and it cuts the vertical axis at 20 units of good Y. If the price of good X is $20 and the price of good Y is $12, then what does income equal?

Accepted Answer

A) $200 
B) $240 
C) $520 
D) $280 
E) There is not enough information to answer the question. 
A) $200 
B) $240 
C) $520 
D) $280 
E) There is not enough information to answer the question.

Question 14

Adam Smith observed that often things that have the greatest value in use, or are the most useful, have a relatively low price, and things that have little or no value in use have a high price.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that in the year 2050, one gallon of water is more expensive than a one-carat diamond. What could explain this?

Accepted Answer

A) Water must be much more scarce in the world of 2050 than today. 
B) Diamonds must be much less scarce in the world of 2050 than today. 
C) The diamond-water paradox does not hold for any pair of goods in the future. 
D) The law of diminishing marginal utility no longer holds. 
E) a or b 
A) Water must be much more scarce in the world of 2050 than today. 
B) Diamonds must be much less scarce in the world of 2050 than today. 
C) The diamond-water paradox does not hold for any pair of goods in the future. 
D) The law of diminishing marginal utility no longer holds. 
E) a or b

Question 16

Exhibit 20-7
​
  
-Refer to Exhibit 20-7. The price of X is $40 and the price of Y is $80. Assuming that the consumer allocates all of his income to good X, how many units of X will he purchase? (Request: Do not ask the instructor to which graph the question is referring.)

Accepted Answer

A) 40 
B) 50 
C) 80 
D) 90 
E) 120 
A) 40 
B) 50 
C) 80 
D) 90 
E) 120

Question 17

Rich has $100,000 and Poore has $1,000. Which of these statements is most strongly supported by the theory of consumer choice?

Accepted Answer

A) An extra dollar given to Rich is worth less to him than his 100,000th dollar. 
B) An extra dollar is worth less to Rich than it is to Poore. 
C) An extra dollar is worth less to Poore than it is to Rich. 
D) Rich's 1,000th dollar is worth more to Rich than Poore's 1,000th dollar is worth to Poore. 
E) Rich's 100,000th dollar is worth to Rich exactly what Poore's 1,000th dollar is worth to Poore. 
A) An extra dollar given to Rich is worth less to him than his 100,000th dollar. 
B) An extra dollar is worth less to Rich than it is to Poore. 
C) An extra dollar is worth less to Poore than it is to Rich. 
D) Rich's 1,000th dollar is worth more to Rich than Poore's 1,000th dollar is worth to Poore. 
E) Rich's 100,000th dollar is worth to Rich exactly what Poore's 1,000th dollar is worth to Poore.

Question 18

Indifference curves are convex to the origin if

Accepted Answer

A) a person's marginal rate of substitution declines as he or she consumes more of a good. 
B) a person's marginal rate of substitution increases as he or she consumes more of a good. 
C) the law of diminishing marginal utility holds. 
D) a and c 
E) none of the above 
A) a person's marginal rate of substitution declines as he or she consumes more of a good. 
B) a person's marginal rate of substitution increases as he or she consumes more of a good. 
C) the law of diminishing marginal utility holds. 
D) a and c 
E) none of the above

Question 19

Exhibit 20-5
  
-Refer to Exhibit 20-5. What value goes in blank (C)?

Accepted Answer

A) 28 
B) 16 
C) 44 
D) 50 
E) There is not enough information to answer this question. 
A) 28 
B) 16 
C) 44 
D) 50 
E) There is not enough information to answer this question.

Question 20

Marginal utility analysis can be used to illustrate the law of demand.

Accepted Answer

A) True 
 B)False

Exam 20: Consumer Choice and Behavioral Economics

Exhibit 20-4 -Refer to Exhibit 20-4. What value goes in blank (B)?

Economists David Zizzo and Andrew Oswald found that the majority of their study participants made themselves worse off in order to make someone else worse off.

Exhibit 20-1 -Refer to Exhibit 20-1. In this example, marginal utility

The __________ one's income, the __________ one's budget constraint.

Consider two options: (A) you receive a guaranteed payment of $100; (B) a coin is tossed and if heads comes up, you win nothing; if tails comes up, you win $200. The expected payoff for option A is:

Marginal utility is always a positive number.

Suppose you are eating buffalo wings at a local happy hour. The total utils from doing so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 150, respectively. The marginal utility of the sixth wing is __________ utils.

Exhibit 20-8 ​ -Refer to Exhibit 20-8. If the price of good X rises, the budget constraint moves from budget constraint

The absolute value of the slope of the budget constraint is also known as the marginal rate of substitution.

Indifference curves are generally downward sloping and concave to the origin.

If total utility of a good is high while the price of the good is low, it is likely that the good

Which of the following statements does not invoke interpersonal utility comparisons?

The budget constraint cuts the horizontal axis at 12 units of good X and it cuts the vertical axis at 20 units of good Y. If the price of good X is $20 and the price of good Y is $12, then what does income equal?

Adam Smith observed that often things that have the greatest value in use, or are the most useful, have a relatively low price, and things that have little or no value in use have a high price.

Suppose that in the year 2050, one gallon of water is more expensive than a one-carat diamond. What could explain this?

Exhibit 20-7 ​ -Refer to Exhibit 20-7. The price of X is $40 and the price of Y is $80. Assuming that the consumer allocates all of his income to good X, how many units of X will he purchase? (Request: Do not ask the instructor to which graph the question is referring.)

Rich has $100,000 and Poore has $1,000. Which of these statements is most strongly supported by the theory of consumer choice?

Indifference curves are convex to the origin if

Exhibit 20-5 -Refer to Exhibit 20-5. What value goes in blank (C)?

Marginal utility analysis can be used to illustrate the law of demand.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

The one's income, the one's budget constraint.

Exhibit 20-8 -Refer to Exhibit 20-8. If the price of good X rises, the budget constraint moves from budget constraint

Exhibit 20-7 -Refer to Exhibit 20-7. The price of X is $40 and the price of Y is $80. Assuming that the consumer allocates all of his income to good X, how many units of X will he purchase? (Request: Do not ask the instructor to which graph the question is referring.)