Exam 5: Consumer Choice: Individual and Market Demand

Americans choose cola over other flavors 70 percent of the time. Analysts say this is because cola's flavor is more robust and durable. Orange soda, for example, suffers from flavor fatigue faster than cola. Also, because cola contains caffeine, people may be addicted to the stimulant. Which panel in Figure 5-1 best illustrates these facts?

The market demand curve is the horizontal summation of all individual demand curves.

Economic theory has traditionally focused on optimality in decision making.

Figure 5-6 A shift in the budget line in Figure 5-6 from AB to AC indicates

If income rises, most consumers will increase the quantity demanded of an inferior good.

A budget line can show all but one of the following statements below. Which one does it not show?

In Poland's free market, Felix Siemienas is making a fortune in cold cuts. Prices are much higher than formerly. Siemienas says, "Yes, my prices are high. If nobody buys, I bring my prices down. That is the market rule." This "rule" best describes

Even if all individual demand curves are downwardly sloped, the market demand curve may slope upward.

Bob values the utility of a single scoop of Baskin-Robbins ice cream at $1.50. A double scoop gives total utility of $2.25, while a triple scoop yields $2.60. Baskin-Robbins charges $1.35 for a single, $1.95 for a double, and $2.35 for a triple. How many scoops will Bob buy?

-Figure 5-5 shows a consumer budget line for French fries and hamburgers. The household allocates a budget for these two goods. Suppose that the price of an order of French fries is $2, what is household income?

For most goods and most people, marginal utility probably

Figure 5-15 Hal initially consumes the combination marked as A in Figure 5-15. After his income increases, Hal consumes combination B. We can conclude that Hal views

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

Figure 5-16 -Figure 5-16 shows Adam's purchases of bananas and apples when apples cost $5 each and bananas $4 each. The information implies that Adam's income

Figure 5-13 -​In Figure 5-13, the consumer is better off

Points along a budget line represent the maximum combinations of two commodities that a consumer can afford.

Since price tends to equal marginal utility, the price of water is low and the price of diamonds is high.

Economists consider instances of increasing marginal utility to be

-Figure 5-5 shows a consumer budget line for French fries and hamburgers. If the household has $20 to spend, the price of hamburgers is

The law of diminishing marginal utility explains why