Question 1

Consumers have to make tradeoffs in deciding what to consume because

Accepted Answer

A) not all goods give them the same amount of satisfaction. 
B) the prices of goods vary. 
C) they are limited by a budget constraint. 
D) there are not enough of all goods produced. 
A) not all goods give them the same amount of satisfaction. 
B) the prices of goods vary. 
C) they are limited by a budget constraint. 
D) there are not enough of all goods produced.

Question 2

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 3

Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping.A logical reason for this is that the decline in fuel prices

Accepted Answer

A) shifted the supply curve for airline tickets to the left, and at the same time an increase in demand for airline tickets shifted the demand curve to the right, so prices did not decline. 
B) shifted the supply curve for airline tickets to the right, and at the same time a decrease in demand for airline tickets shifted the demand curve to the left, so prices still increased. 
C) shifted the supply curve for airline tickets to the right, and at the same time an increase in demand for airline tickets shifted the demand curve to the right, so prices still increased. 
D) shifted the supply curve for airline tickets to the left, and at the same time a decrease in demand for airline tickets shifted the demand curve to the left, so prices did not decline. 
A) shifted the supply curve for airline tickets to the left, and at the same time an increase in demand for airline tickets shifted the demand curve to the right, so prices did not decline. 
B) shifted the supply curve for airline tickets to the right, and at the same time a decrease in demand for airline tickets shifted the demand curve to the left, so prices still increased. 
C) shifted the supply curve for airline tickets to the right, and at the same time an increase in demand for airline tickets shifted the demand curve to the right, so prices still increased. 
D) shifted the supply curve for airline tickets to the left, and at the same time a decrease in demand for airline tickets shifted the demand curve to the left, so prices did not decline.

Question 4

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

Accepted Answer

1.Consumers may believe that the celebri

Question 5

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 6

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

Accepted Answer

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

Question 7

Economists have shown that when the ultimatum game experiment is carried out, both allocators and recipients act as if fairness is important.

Accepted Answer

A) True 
 B)False

Question 8

The endowment effect suggests that that people

Accepted Answer

A) have a strong attachment to their entitlement, regardless of whether they paid to acquire them. 
B) have a strong sense of fairness. 
C) are concerned about the welfare of others. 
D) act in ways to distort market prices. 
A) have a strong attachment to their entitlement, regardless of whether they paid to acquire them. 
B) have a strong sense of fairness. 
C) are concerned about the welfare of others. 
D) act in ways to distort market prices.

Question 9

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, cause 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, cause consumers to buy less Raisin Bran.

Question 10

Which of the following is a common mistake consumers commit when they make decisions?

Accepted Answer

A) They take into account nonmonetary opportunity costs but ignore monetary costs. 
B) They are overly pessimistic about their future behavior. 
C) They fail to ignore sunk costs. 
D) They sometimes value fairness too much. 
A) They take into account nonmonetary opportunity costs but ignore monetary costs. 
B) They are overly pessimistic about their future behavior. 
C) They fail to ignore sunk costs. 
D) They sometimes value fairness too much.

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

Consider a good whose consumption takes place publicly.Your decision to buy that good depends

Accepted Answer

A) both on the characteristics of the product and on how many other people are buying the good. 
B) only on the characteristics of the good. 
C) only on how many other people buy the good. 
D) only on the price of the good. 
A) both on the characteristics of the product and on how many other people are buying the good. 
B) only on the characteristics of the good. 
C) only on how many other people buy the good. 
D) only on the price of the good.

Question 13

Manitory pension plans sometimes result in workers total savings for retirement actually being lower than without a pension plan.What does this suggest about how people save for their retirement?

Accepted Answer

A) Planning for one's retirement is complex and emotional and most people deliberately avoid confronting these financial decisions. 
B) People are overly pessimistic about their future financial prospects; many fear that the Canada Pension Plan may be non-existent by the time they retire. 
C) Many people need to be "tricked" into saving because they are unrealistic about their future behavior. They spend money today that they should be saving for retirement, partly because they overestimate their ability to save in the future. 
D) Most people are not capable making good decisions about their future. 
A) Planning for one's retirement is complex and emotional and most people deliberately avoid confronting these financial decisions. 
B) People are overly pessimistic about their future financial prospects; many fear that the Canada Pension Plan may be non-existent by the time they retire. 
C) Many people need to be "tricked" into saving because they are unrealistic about their future behavior. They spend money today that they should be saving for retirement, partly because they overestimate their ability to save in the future. 
D) Most people are not capable making good decisions about their future.

Question 14

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good, with an income effect larger than its substitution effect, a good must be ________ and make up a ________ portion of a consumer's budget.

Accepted Answer

A) a normal good; very small 
B) an inferior good; very small 
C) a normal good; very large 
D) an inferior good; very large 
A) a normal good; very small 
B) an inferior good; very small 
C) a normal good; very large 
D) an inferior good; very large

Question 15

What must be true in terms of the income effect, the substitution effect, and the type of good for the good's demand curve to be upward sloping?

Accepted Answer

The income effect would have t

Question 16

When the price of summer tank tops falls and you buy more of them because they are relatively less expensive, this is called

Accepted Answer

A) the substitution effect. 
B) the income effect. 
C) the deadweight loss effect. 
D) the elasticity effect. 
A) the substitution effect. 
B) the income effect. 
C) the deadweight loss effect. 
D) the elasticity effect.

Question 17

Gowri has $6 per day to purchase lunch.She spends all of her lunch money on pizza and iced-tea.The price of pizza is $2.00 per slice and iced-tea costs $1 per bottle.
a.Draw Gowri's budget constraint and label it BC₀.Put pizza on the horizontal axis and iced-tea on the vertical axis.Be sure to identify the intercept values.
b.If the price of iced-tea rises to $1.20 per bottle, show what will happen to her budget constraint in your diagram.Be sure to indicate any new intercept values.

Accepted Answer

a.
 @#IMG-DLM& 
b.BC₁ in the f

Question 18

If Dawson prefers pizza to hamburgers and hamburgers to hot dogs, then if preferences are transitive,

Accepted Answer

A) at times she could be indifferent among the three items. 
B) she must prefer pizza to hot dogs. 
C) she could prefer hamburgers to pizza on some occasions but not hot dogs to pizza. 
D) she could prefer hot dogs to pizza on some occasions but not hamburgers to hot dogs. 
A) at times she could be indifferent among the three items. 
B) she must prefer pizza to hot dogs. 
C) she could prefer hamburgers to pizza on some occasions but not hot dogs to pizza. 
D) she could prefer hot dogs to pizza on some occasions but not hamburgers to hot dogs.

Question 19

Psychologists Daniel Kahneman and Amos Tversky conducted the following experiments by asking a sample of people the following questions:
Scenario A: "Imagine that you have decided to see a play and paid the admission price of $10 per ticket.As you enter the theater you discover that you have lost the ticket.The seat was not marked and the ticket cannot be recovered.Would you pay $10 for another ticket?"
Scenario B: "Imagine that you have decided to see a play where admission is $10 per ticket.As you enter the theater you discover that you have lost a $10 bill.Would you still pay $10 for a ticket for the play?"
As long as additional tickets are available, there's no meaningful difference between losing $10 in cash before buying a ticket, and losing the $10 ticket after buying it.In both cases, you are out $10.Yet, far more subjects (88 percent)in Scenario B say they would pay $10 for another ticket and see the play while in Scenario A, only 46 percent of the subjects say they would be willing to spend another $10 to see the play.
Which of the following is the best explanation for the results of the experiment?

Accepted Answer

A) The endowment effect applies in Scenario A since people already own the ticket and therefore it is more valuable but this is not so in Scenario B. 
B) In Scenario B, people had not anticipated spending an additional $10 so in effect the price of the ticket is $20 and not $10 whereas in Scenario A, the price of the ticket is still $10. 
C) In Scenario A, people make an immediate connection between the lost ticket and the play and feel poorer by incorrectly assigning a greater value to the value of the ticket whereas in Scenario B, they do not make the connection between the lost $10 bill and the play. 
D) The net benefit derived from watching the play is lower in Scenario A where the effective cost is $20 compared to the net benefit in Scenario B. 
A) The endowment effect applies in Scenario A since people already own the ticket and therefore it is more valuable but this is not so in Scenario B. 
B) In Scenario B, people had not anticipated spending an additional $10 so in effect the price of the ticket is $20 and not $10 whereas in Scenario A, the price of the ticket is still $10. 
C) In Scenario A, people make an immediate connection between the lost ticket and the play and feel poorer by incorrectly assigning a greater value to the value of the ticket whereas in Scenario B, they do not make the connection between the lost $10 bill and the play. 
D) The net benefit derived from watching the play is lower in Scenario A where the effective cost is $20 compared to the net benefit in Scenario B.

Question 20

If, when you consume another piece of candy, your marginal utility is zero, then

Accepted Answer

A) you want more candy. 
B) you have maximized your total utility from consuming candy. 
C) you have not yet reached the point of diminishing marginal utility. 
D) you should consume less candy. 
A) you want more candy. 
B) you have maximized your total utility from consuming candy. 
C) you have not yet reached the point of diminishing marginal utility. 
D) you should consume less candy.

Consumers have to make tradeoffs in deciding what to consume because

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

Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping.A logical reason for this is that the decline in fuel prices

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

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?

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

Economists have shown that when the ultimatum game experiment is carried out, both allocators and recipients act as if fairness is important.

The endowment effect suggests that that people

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

Which of the following is a common mistake consumers commit when they make decisions?

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

Consider a good whose consumption takes place publicly.Your decision to buy that good depends

Manitory pension plans sometimes result in workers total savings for retirement actually being lower than without a pension plan.What does this suggest about how people save for their retirement?

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good, with an income effect larger than its substitution effect, a good must be and make up a portion of a consumer's budget.

What must be true in terms of the income effect, the substitution effect, and the type of good for the good's demand curve to be upward sloping?

When the price of summer tank tops falls and you buy more of them because they are relatively less expensive, this is called

If Dawson prefers pizza to hamburgers and hamburgers to hot dogs, then if preferences are transitive,

If, when you consume another piece of candy, your marginal utility is zero, then

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

Comparative Advantage and the Gains From International Trade

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

Exam 8: Consumer Choice and Behavioral Economics

Consumers have to make tradeoffs in deciding what to consume because

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

Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping.A logical reason for this is that the decline in fuel prices

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

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?

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

Economists have shown that when the ultimatum game experiment is carried out, both allocators and recipients act as if fairness is important.

The endowment effect suggests that that people

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

Which of the following is a common mistake consumers commit when they make decisions?

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

Consider a good whose consumption takes place publicly.Your decision to buy that good depends

Manitory pension plans sometimes result in workers total savings for retirement actually being lower than without a pension plan.What does this suggest about how people save for their retirement?

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good, with an income effect larger than its substitution effect, a good must be ________ and make up a ________ portion of a consumer's budget.

What must be true in terms of the income effect, the substitution effect, and the type of good for the good's demand curve to be upward sloping?

When the price of summer tank tops falls and you buy more of them because they are relatively less expensive, this is called

If Dawson prefers pizza to hamburgers and hamburgers to hot dogs, then if preferences are transitive,

If, when you consume another piece of candy, your marginal utility is zero, then

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

Comparative Advantage and the Gains From International Trade

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good, with an income effect larger than its substitution effect, a good must be and make up a portion of a consumer's budget.