Question 1

Economists Gary Becker and Kevin Murphy are associated with which of the following?

Accepted Answer

A) They discovered the first example of a Giffen good. 
B) They have argued that social factors are not important in explaining the choices consumers make. 
C) They both believe that consumers appear to receive utility from consuming goods they believe are popular. 
D) They discovered that price changes have both income and substitution effects. 
A) They discovered the first example of a Giffen good. 
B) They have argued that social factors are not important in explaining the choices consumers make. 
C) They both believe that consumers appear to receive utility from consuming goods they believe are popular. 
D) They discovered that price changes have both income and substitution effects.

Question 2

For which of the following products is social influence likely to have the greatest impact?

Accepted Answer

A) toothpaste 
B) restaurants 
C) high-blood pressure medication 
D) school textbook 
A) toothpaste 
B) restaurants 
C) high-blood pressure medication 
D) school textbook

Question 3

The income effect of a decrease in the price of macaroni and cheese (assume this is an inferior good)results in

Accepted Answer

A) a decrease in the demand for macaroni and cheese. 
B) an increase in the quantity of macaroni and cheese demanded. 
C) a decrease in the quantity of macaroni and cheese demanded. 
D) an increase in the demand for macaroni and cheese. 
A) a decrease in the demand for macaroni and cheese. 
B) an increase in the quantity of macaroni and cheese demanded. 
C) a decrease in the quantity of macaroni and cheese demanded. 
D) an increase in the demand for macaroni and cheese.

Question 4

Article Summary
The use of celebrity endorsements can be a good way to promote a brand, as long as the brand fits the celebrity. The article discusses three reasons why a company should use celebrity endorsements:
1. Celebrities have a large range of followers, giving them the ability to build brand equity which created product differentiation to consumers.
2. Companies can reach a global audience since celebrities have worldwide fan bases, and an endorsement can link the product to a celebrity's skills, making fans feel closer to and more like the celebrity.
3. Celebrity endorsements increase consumers' awareness of a product, since consumers are more likely to remember an ad linked to a celebrity.
However, not all celebrities are the right fit for all products. Endorsements can backfire if the celebrities are promoting something they would never use, giving the impression of nothing more than a sponsored advertisement.
Source: Erika Warne, "Why Brands Should Use Celebrity Endorsements," weareanthology.com, April 20, 2017.
-Refer to the Article Summary.One explanation for the increase in product sales because of celebrity endorsements is that people seem to receive ________ from goods they believe are popular.

Accepted Answer

A) more utility 
B) diminishing utility 
C) greater network externalities 
D) increased path dependency 
A) more utility 
B) diminishing utility 
C) greater network externalities 
D) increased path dependency

Question 5

Which of the following statements about utility and preferences is false?

Accepted Answer

A) If Sidra prefers tea to coffee and coffee to hot chocolate, then she must prefer tea to hot chocolate. 
B) Preferences can be ranked. 
C) If two individuals, Ingrid and Inez, each consume the same bundle of goods, then both Inez and Ingrid must receive the same utility from the bundle. 
D) Utility cannot be compared across consumers. 
A) If Sidra prefers tea to coffee and coffee to hot chocolate, then she must prefer tea to hot chocolate. 
B) Preferences can be ranked. 
C) If two individuals, Ingrid and Inez, each consume the same bundle of goods, then both Inez and Ingrid must receive the same utility from the bundle. 
D) Utility cannot be compared across consumers.

Question 6

Which of the following is explained by the law of diminishing marginal utility?

Accepted Answer

A) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third bottle of Coca-Cola. 
B) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third pretzel. 
C) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her friend Margie's third pretzel. 
D) The total utility of one bottle of Coca-Cola is greater than the total utility of two bottles of Coca-Cola. 
A) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third bottle of Coca-Cola. 
B) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third pretzel. 
C) The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her friend Margie's third pretzel. 
D) The total utility of one bottle of Coca-Cola is greater than the total utility of two bottles of Coca-Cola.

Question 7

Figure 10-4
  
-Refer to Figure 10-4.Best friends Laurel and Hardy, both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

Accepted Answer

A) They have identical movie preferences. 
B) Laurel enjoys romantic comedies more than Hardy. 
C) Laurel enjoys science fiction movies more than Hardy. 
D) The diagrams do not provide any information about relative preferences. 
A) They have identical movie preferences. 
B) Laurel enjoys romantic comedies more than Hardy. 
C) Laurel enjoys science fiction movies more than Hardy. 
D) The diagrams do not provide any information about relative preferences.

Question 8

The slope of an indifference curve

Accepted Answer

A) is calculated by dividing the price of good on the vertical axis by price of the good on the horizontal axis. 
B) measures total utility. 
C) measures the marginal rate of substitution between the two goods in question. 
D) is calculated by dividing the quantity of the good on the vertical axis by the quantity of the good on the horizontal axis. 
A) is calculated by dividing the price of good on the vertical axis by price of the good on the horizontal axis. 
B) measures total utility. 
C) measures the marginal rate of substitution between the two goods in question. 
D) is calculated by dividing the quantity of the good on the vertical axis by the quantity of the good on the horizontal axis.

Question 9

If by purchasing more apples and fewer oranges you increase your total utility, then apples must be cheaper than oranges.

Accepted Answer

A) True 
 B)False

Question 10

Alan Krueger conducted a survey of fans at the 2001 Super Bowl who purchased tickets to the game for $325 or $400.Krueger found that (a)94 percent of those surveyed would not have paid $3,000 for their tickets, and (b)92 percent of those surveyed would not have sold their tickets for $3,000.These results are an example of

Accepted Answer

A) rational consumer behavior. 
B) the endowment effect. 
C) the fallacy of composition. 
D) the failure to ignore sunk costs. 
A) rational consumer behavior. 
B) the endowment effect. 
C) the fallacy of composition. 
D) the failure to ignore sunk costs.

Question 11

The satisfaction a person receives from consuming goods and services is called

Accepted Answer

A) contentment. 
B) psychic income. 
C) wealth. 
D) utility. 
A) contentment. 
B) psychic income. 
C) wealth. 
D) utility.

Question 12

Figure 10-7
   
The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy.
-Refer to Figure 10-7.A change in income is shown in

Accepted Answer

A) Panel A. 
B) Panel B. 
C) Panel C. 
D) none of the above panels. 
A) Panel A. 
B) Panel B. 
C) Panel C. 
D) none of the above panels.

Question 13

Harvey Miller owns a baseball that was hit for a home run by Ted Williams.Harvey, a long-time Boston Red Sox fan, recently refused to sell his baseball for $75,000 even though he would not have paid someone more than $10,000 for the baseball if he did not already own it.Harvey explained his decision not to sell the baseball by noting that: "Ted Williams was my hero.This baseball has a great deal of sentimental value for me." Which of the following can explain Harvey's behavior?

Accepted Answer

A) the difference between implicit and explicit costs 
B) the scarcity of home run baseballs hit by Ted Williams 
C) the endowment effect 
D) how social influences can affect consumption choices 
A) the difference between implicit and explicit costs 
B) the scarcity of home run baseballs hit by Ted Williams 
C) the endowment effect 
D) how social influences can affect consumption choices

Question 14

If you received negative marginal utility from consuming the 4th slice of pizza, then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.

Accepted Answer

A) True 
 B)False

Question 15

Suppose the marginal utilities for the first three cans of soda are 100, 80 and 60, respectively.The total utility received from consuming 2 cans is

Accepted Answer

A) 20. 
B) 80. 
C) 90. 
D) 180. 
A) 20. 
B) 80. 
C) 90. 
D) 180.

Question 16

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

Accepted Answer

A) True 
 B)False

Question 17

Some online penny auctions charge a fee, such as $1, for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

Accepted Answer

The $1 charge per bid should be consider

Question 18

Economists usually assume that people act in a rational, self-interested way.In explaining how consumers make choices this means that economists believe

Accepted Answer

A) consumers will always buy goods and services at the lowest possible prices. 
B) consumers spend their incomes to order to accumulate the most goods and services. 
C) consumers make choices that will leave them as satisfied as possible given their incomes, tastes, and the prices of goods and services available to them. 
D) consumers will spend their incomes and time on activities that benefit themselves as much as possible, without regard to the welfare of others. 
A) consumers will always buy goods and services at the lowest possible prices. 
B) consumers spend their incomes to order to accumulate the most goods and services. 
C) consumers make choices that will leave them as satisfied as possible given their incomes, tastes, and the prices of goods and services available to them. 
D) consumers will spend their incomes and time on activities that benefit themselves as much as possible, without regard to the welfare of others.

Question 19

Economists do not think it is possible to compare the relative utility that two people get from consuming an additional unit of a particular good.

Accepted Answer

A) True 
 B)False

Question 20

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.

Economists Gary Becker and Kevin Murphy are associated with which of the following?

For which of the following products is social influence likely to have the greatest impact?

The income effect of a decrease in the price of macaroni and cheese (assume this is an inferior good)results in

Which of the following statements about utility and preferences is false?

Which of the following is explained by the law of diminishing marginal utility?

Figure 10-4 -Refer to Figure 10-4.Best friends Laurel and Hardy, both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

The slope of an indifference curve

If by purchasing more apples and fewer oranges you increase your total utility, then apples must be cheaper than oranges.

The satisfaction a person receives from consuming goods and services is called

Figure 10-7 The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy. -Refer to Figure 10-7.A change in income is shown in

If you received negative marginal utility from consuming the 4th slice of pizza, then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.

Suppose the marginal utilities for the first three cans of soda are 100, 80 and 60, respectively.The total utility received from consuming 2 cans is

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

Some online penny auctions charge a fee, such as $1, for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

Economists usually assume that people act in a rational, self-interested way.In explaining how consumers make choices this means that economists believe

Economists do not think it is possible to compare the relative utility that two people get from consuming an additional unit of a particular good.

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?

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

Economists Gary Becker and Kevin Murphy are associated with which of the following?

For which of the following products is social influence likely to have the greatest impact?

The income effect of a decrease in the price of macaroni and cheese (assume this is an inferior good)results in

Which of the following statements about utility and preferences is false?

Which of the following is explained by the law of diminishing marginal utility?

Figure 10-4 -Refer to Figure 10-4.Best friends Laurel and Hardy, both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

The slope of an indifference curve

If by purchasing more apples and fewer oranges you increase your total utility, then apples must be cheaper than oranges.

The satisfaction a person receives from consuming goods and services is called

Figure 10-7 The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy. -Refer to Figure 10-7.A change in income is shown in

If you received negative marginal utility from consuming the 4th slice of pizza, then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.

Suppose the marginal utilities for the first three cans of soda are 100, 80 and 60, respectively.The total utility received from consuming 2 cans is

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

Some online penny auctions charge a fee, such as $1, for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

Economists usually assume that people act in a rational, self-interested way.In explaining how consumers make choices this means that economists believe

Economists do not think it is possible to compare the relative utility that two people get from consuming an additional unit of a particular good.

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?

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