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

When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to

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 3

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.

Question 4

The demand curve for a Giffen good is

Accepted Answer

A) non-linear but downward sloping. 
B) vertical. 
C) upward sloping. 
D) non-existent. 
A) non-linear but downward sloping. 
B) vertical. 
C) upward sloping. 
D) non-existent.

Question 5

The highest-valued alternative that must be given up to engage in an activity is the definition of

Accepted Answer

A) utility. 
B) implicit cost. 
C) opportunity cost. 
D) economic sacrifice. 
A) utility. 
B) implicit cost. 
C) opportunity cost. 
D) economic sacrifice.

Question 6

Table 10-2
   
Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.
-Refer to Table 10-2.If Keira maximizes her utility, how many units of each good should she buy?

Accepted Answer

A) 1 cup of soup and 5 sandwiches 
B) 3 cups of soup and 4 sandwiches 
C) 6 cups of soup and 2 sandwiches 
D) 4 cups of soup and 3.5 sandwiches 
A) 1 cup of soup and 5 sandwiches 
B) 3 cups of soup and 4 sandwiches 
C) 6 cups of soup and 2 sandwiches 
D) 4 cups of soup and 3.5 sandwiches

Question 7

Table 10-3
  
-Refer to Table 10-3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda.The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1.Use this information to select the correct statement.

Accepted Answer

A) We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his budget is. 
B) To maximize his utility Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda. 
C) We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee's utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity. 
D) If Lee has an unlimited budget he will maximize his utility by buying only Lime Fizz Soda. 
A) We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his budget is. 
B) To maximize his utility Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda. 
C) We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee's utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity. 
D) If Lee has an unlimited budget he will maximize his utility by buying only Lime Fizz Soda.

Question 8

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

Accepted Answer

Network externalities can create signifi

Question 9

A budget constraint

Accepted Answer

A) represents the bundles of consumption that make a consumer equally happy. 
B) refers to the limited amount of income available to consumers to spend on goods and services. 
C) reflects the desire by consumers to increase their income. 
D) shows the prices that a consumer chooses to pay for products he consumes. 
A) represents the bundles of consumption that make a consumer equally happy. 
B) refers to the limited amount of income available to consumers to spend on goods and services. 
C) reflects the desire by consumers to increase their income. 
D) shows the prices that a consumer chooses to pay for products he consumes.

Question 10

Before digital photography, most film processing companies had a policy of printing every picture on a roll of film and allowing customers to request a refund for pictures that were not clearly developed.The companies did this knowing that most customers did not ask for refunds.This was an example of consumers

Accepted Answer

A) failing to ignore sunk costs. 
B) being overly optimistic about their future behavior. 
C) not taking nonmonetary opportunity costs into account. 
D) not making themselves aware of the policy regarding refunds. 
A) failing to ignore sunk costs. 
B) being overly optimistic about their future behavior. 
C) not taking nonmonetary opportunity costs into account. 
D) not making themselves aware of the policy regarding refunds.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Figure 10-3
   
Bettye Babylon does not charge admission to her arboreal estate, the Hanging Gardens. Due to space limitations, Bettye only allows 200 visitors per day at her estate. The figure represents the supply and demand for admission to the Hanging Gardens.
-Refer to Figure 10-3.At a ticket price of $0, the marginal benefit from the 200th ticket is

Accepted Answer

A) equal to the price. 
B) below the price. 
C) above the price. 
D) negative. 
A) equal to the price. 
B) below the price. 
C) above the price. 
D) negative.

Question 13

Table 10-2
   
Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.
-Refer to Table 10-2.Holding prices constant, when Keira's income changed from $18 to $23, her utility maximizing bundle changed.Based on your answers to her optimal choices at the two income levels, what type of goods are soup and sandwiches?

Accepted Answer

A) Soup is an inferior good and sandwiches are a normal good. 
B) Soup is a normal good and sandwiches are an inferior good. 
C) Both soup and sandwiches are normal goods. 
D) Both soup and sandwiches are inferior goods. 
A) Soup is an inferior good and sandwiches are a normal good. 
B) Soup is a normal good and sandwiches are an inferior good. 
C) Both soup and sandwiches are normal goods. 
D) Both soup and sandwiches are inferior goods.

Question 14

What is marginal utility and what is the law of diminishing marginal utility?

Accepted Answer

Marginal utility is the change in total

Question 15

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is maximized.

Accepted Answer

A) True 
 B)False

Question 16

Figure 10-10
  
-Refer to Figure 10-10.If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC₂?

Accepted Answer

A) $8 
B) $10 
C) $20 
D) $40 
A) $8 
B) $10 
C) $20 
D) $40

Question 17

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit, and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased, she

Accepted Answer

A) is maximizing total utility and does not want to change her consumption of ankle socks or bandanas. 
B) wants to consume more ankle socks and fewer bandanas. 
C) wants to consume more bandanas and fewer ankle socks. 
D) wants to consume less of both ankle sock and bandanas. 
A) is maximizing total utility and does not want to change her consumption of ankle socks or bandanas. 
B) wants to consume more ankle socks and fewer bandanas. 
C) wants to consume more bandanas and fewer ankle socks. 
D) wants to consume less of both ankle sock and bandanas.

Question 18

If the marginal utility Ida Mae receives from eating chicken wings is negative then

Accepted Answer

A) her total utility from eating chicken wings has fallen. 
B) her total utility from eating chicken wings is negative as well. 
C) Ida Mae definitely does not like chicken wings. 
D) her total utility has risen, but by less from the last chicken wing than from the next to last chicken wing. 
A) her total utility from eating chicken wings has fallen. 
B) her total utility from eating chicken wings is negative as well. 
C) Ida Mae definitely does not like chicken wings. 
D) her total utility has risen, but by less from the last chicken wing than from the next to last chicken wing.

Question 19

The law of diminishing marginal utility states that

Accepted Answer

A) eventually total utility falls as more of a good is consumed, other things constant. 
B) the extra satisfaction from consuming a good decreases as more of a good is consumed, other things constant. 
C) the extra satisfaction from consuming a good increases slowly as more of a good is consumed, other things constant. 
D) when the extra satisfaction from consuming a good becomes negative, total utility starts falling, other things constant. 
A) eventually total utility falls as more of a good is consumed, other things constant. 
B) the extra satisfaction from consuming a good decreases as more of a good is consumed, other things constant. 
C) the extra satisfaction from consuming a good increases slowly as more of a good is consumed, other things constant. 
D) when the extra satisfaction from consuming a good becomes negative, total utility starts falling, other things constant.

Question 20

All but one of the following have been suggested by some economists as possible consequences of path dependency and switching costs.Which of the following is not a possible consequence of path dependency and switching costs?

Accepted Answer

A) Consumers may get locked into using products with inferior technology. 
B) market failure 
C) diseconomies of scale 
D) Government intervention may be necessary in affected markets in order to improve economic efficiency. 
A) Consumers may get locked into using products with inferior technology. 
B) market failure 
C) diseconomies of scale 
D) Government intervention may be necessary in affected markets in order to improve economic efficiency.

Consumers have to make tradeoffs in deciding what to consume because

When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to

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

The demand curve for a Giffen good is

The highest-valued alternative that must be given up to engage in an activity is the definition of

Table 10-2 Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods. -Refer to Table 10-2.If Keira maximizes her utility, how many units of each good should she buy?

Table 10-3 -Refer to Table 10-3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda.The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1.Use this information to select the correct statement.

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

A budget constraint

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

What is marginal utility and what is the law of diminishing marginal utility?

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is maximized.

Figure 10-10 -Refer to Figure 10-10.If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC₂?

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit, and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased, she

If the marginal utility Ida Mae receives from eating chicken wings is negative then

The law of diminishing marginal utility states that

All but one of the following have been suggested by some economists as possible consequences of path dependency and switching costs.Which of the following is not a possible consequence of path dependency and switching costs?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 10: Consumer Choice and Behavioral Economics

Consumers have to make tradeoffs in deciding what to consume because

When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to

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

The demand curve for a Giffen good is

The highest-valued alternative that must be given up to engage in an activity is the definition of

Table 10-2 Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods. -Refer to Table 10-2.If Keira maximizes her utility, how many units of each good should she buy?

Table 10-3 -Refer to Table 10-3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda.The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1.Use this information to select the correct statement.

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

A budget constraint

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

What is marginal utility and what is the law of diminishing marginal utility?

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is maximized.

Figure 10-10 -Refer to Figure 10-10.If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC₂?

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit, and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased, she

If the marginal utility Ida Mae receives from eating chicken wings is negative then

The law of diminishing marginal utility states that

All but one of the following have been suggested by some economists as possible consequences of path dependency and switching costs.Which of the following is not a possible consequence of path dependency and switching costs?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters