Question 1

The demand curve for corn is downward sloping.If the price of corn, an inferior good, falls,

Accepted Answer

A) the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded. 
B) the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded. 
C) both the income and substitution effects reinforce each other to increase the quantity demanded. 
D) the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn. 
A) the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded. 
B) the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded. 
C) both the income and substitution effects reinforce each other to increase the quantity demanded. 
D) the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn.

Question 2

When diminishing marginal utility sets in, total utility must be negative.

Accepted Answer

A) True 
 B)False

Question 3

Why might network externalities result in products that contain inferior technologies?

Accepted Answer

Network externalities can create signifi

Question 4

A Giffen good could be either a normal good or an inferior good.

Accepted Answer

A) True 
 B)False

Question 5

Marginal utility can be

Accepted Answer

A) negative. 
B) zero. 
C) positive. 
D) positive, negative or zero. 
A) negative. 
B) zero. 
C) positive. 
D) positive, negative or zero.

Question 6

Giffen goods

Accepted Answer

A) are theoretical and have never been discovered in the real world. 
B) have not existed since prior to the Industrial Revolution. 
C) were proven to exist in the 1890s by Sir Robert Giffen. 
D) were not shown to actually exist until 2006. 
A) are theoretical and have never been discovered in the real world. 
B) have not existed since prior to the Industrial Revolution. 
C) were proven to exist in the 1890s by Sir Robert Giffen. 
D) were not shown to actually exist until 2006.

Question 7

A network externality refers to a situation in which the usefulness of a product decreases with the number of consumers who use it.

Accepted Answer

A) True 
 B)False

Question 8

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

Accepted Answer

A) People measure the value of a good in terms of its purchase price. 
B) Even though sunk costs cannot be recovered, it has been incurred and therefore should be treated as part of the product's value. 
C) If consumers maximize their utility, it makes sense to consider the full purchase price of a product in their consumption decisions. 
D) Sunk costs have a higher opportunity cost than costs that can be recovered. 
A) People measure the value of a good in terms of its purchase price. 
B) Even though sunk costs cannot be recovered, it has been incurred and therefore should be treated as part of the product's value. 
C) If consumers maximize their utility, it makes sense to consider the full purchase price of a product in their consumption decisions. 
D) Sunk costs have a higher opportunity cost than costs that can be recovered.

Question 9

If you exhibit the endowment effect as a decision maker, then you are

Accepted Answer

A) deciding on the basis of sunk costs. 
B) buying something you can't really afford because you expect to save in the future. 
C) ignoring opportunity costs. 
D) consuming based on celebrity endorsements. 
A) deciding on the basis of sunk costs. 
B) buying something you can't really afford because you expect to save in the future. 
C) ignoring opportunity costs. 
D) consuming based on celebrity endorsements.

Question 10

Total utility

Accepted Answer

A) cannot decrease as a person consumes more and more of a good. 
B) has a constant rate of increase as a person consumes more and more of a good. 
C) is equal to the sum of the marginal utilities of all units consumed. 
D) is negative when marginal utility is declining. 
A) cannot decrease as a person consumes more and more of a good. 
B) has a constant rate of increase as a person consumes more and more of a good. 
C) is equal to the sum of the marginal utilities of all units consumed. 
D) is negative when marginal utility is declining.

Question 11

A network externality occurs when

Accepted Answer

A) there is production cost savings from being networked with suppliers. 
B) there is production cost savings from being networked with buyers. 
C) the usefulness of a good is affected by how many others use the good. 
D) the usefulness of a good is affected by celebrities who use the good. 
A) there is production cost savings from being networked with suppliers. 
B) there is production cost savings from being networked with buyers. 
C) the usefulness of a good is affected by how many others use the good. 
D) the usefulness of a good is affected by celebrities who use the good.

Question 12

Economists assume that the goal of consumers is to

Accepted Answer

A) do as little work as possible to survive. 
B) make themselves as well off as possible. 
C) expend all their income. 
D) consume as much as possible. 
A) do as little work as possible to survive. 
B) make themselves as well off as possible. 
C) expend all their income. 
D) consume as much as possible.

Question 13

Along a downward-sloping linear demand curve,

Accepted Answer

A) the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase. 
B) the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities remain constant. 
C) the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases. 
D) the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remain constant. 
A) the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase. 
B) the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities remain constant. 
C) the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases. 
D) the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remain constant.

Question 14

Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because

Accepted Answer

A) car buyers are irrational. 
B) the total utility of less expensive cars is greater than that of luxury cars. 
C) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars. 
D) luxury cars cost a lot more than non-luxury cars. 
A) car buyers are irrational. 
B) the total utility of less expensive cars is greater than that of luxury cars. 
C) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars. 
D) luxury cars cost a lot more than non-luxury cars.

The demand curve for corn is downward sloping.If the price of corn, an inferior good, falls,

When diminishing marginal utility sets in, total utility must be negative.

Why might network externalities result in products that contain inferior technologies?

A Giffen good could be either a normal good or an inferior good.

Marginal utility can be

Giffen goods

A network externality refers to a situation in which the usefulness of a product decreases with the number of consumers who use it.

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

If you exhibit the endowment effect as a decision maker, then you are

Total utility

A network externality occurs when

Economists assume that the goal of consumers is to

Along a downward-sloping linear demand curve,

Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because

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

The demand curve for corn is downward sloping.If the price of corn, an inferior good, falls,

When diminishing marginal utility sets in, total utility must be negative.

Why might network externalities result in products that contain inferior technologies?

A Giffen good could be either a normal good or an inferior good.

Marginal utility can be

Giffen goods

A network externality refers to a situation in which the usefulness of a product decreases with the number of consumers who use it.

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

If you exhibit the endowment effect as a decision maker, then you are

Total utility

A network externality occurs when

Economists assume that the goal of consumers is to

Along a downward-sloping linear demand curve,

Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because

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