Question 1

Total utility is constant along a given indifference curve.

Accepted Answer

A) True 
 B)False

Question 2

Goods with upward sloping demand curves are referred to as

Accepted Answer

A) Marshall goods. 
B) Giffen goods. 
C) substitute goods. 
D) luxury goods. 
A) Marshall goods. 
B) Giffen goods. 
C) substitute goods. 
D) luxury goods.

Question 3

Studies on consumer behavior have found that most people value fairness enough that they will refuse to participate in transactions they consider unfair, even if they are worse off as a result.How does this affect a firm's decision to raise prices in the event of a temporary increase in demand?

Accepted Answer

If the firm chooses to raise prices, con

Question 4

The income effect of an increase in the price of salmon

Accepted Answer

A) is the change in the demand for salmon when income increases. 
B) refers to the relative price effect-salmon is more expensive compared to other types of fish-which causes the consumer to buy less salmon. 
C) refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant. 
D) is the change in the demand for other types of fish, say trout, that results from a decrease in purchasing power. 
A) is the change in the demand for salmon when income increases. 
B) refers to the relative price effect-salmon is more expensive compared to other types of fish-which causes the consumer to buy less salmon. 
C) refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant. 
D) is the change in the demand for other types of fish, say trout, that results from a decrease in purchasing power.

Question 5

Table 10-5
  
-Refer to Table 10-5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub)sandwiches and tacos.Assume that the price of a sub sandwich is $4 and the price of a taco is $2.When Harry's income is $14, he buys two Italian sub sandwiches and three tacos.The last column lists the values of the marginal utility per dollar for tacos when the price of a taco decreases to $1.Complete this statement: As a result of the change in price,

Accepted Answer

A) Harry's purchasing power has increased. He will reduce his consumption of tacos so he can buy one more sub. This is an example of the substitution effect of a price change. 
B) Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy fewer tacos. This is an example of the income effect of a price change. 
C) Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy more tacos. This is an example of the income effect of a price change. 
D) Harry's purchasing power has increased. Harry buys fewer tacos. This is an example of the substitution effect of a price change 
A) Harry's purchasing power has increased. He will reduce his consumption of tacos so he can buy one more sub. This is an example of the substitution effect of a price change. 
B) Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy fewer tacos. This is an example of the income effect of a price change. 
C) Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy more tacos. This is an example of the income effect of a price change. 
D) Harry's purchasing power has increased. Harry buys fewer tacos. This is an example of the substitution effect of a price change

Question 6

Firms pay famous individuals to endorse their products because

Accepted Answer

A) apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product. 
B) the firms are irrational and are wasting advertising expenditures. 
C) famous people obviously know what are the best goods and services. 
D) famous people only consume high-quality products. 
A) apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product. 
B) the firms are irrational and are wasting advertising expenditures. 
C) famous people obviously know what are the best goods and services. 
D) famous people only consume high-quality products.

Question 7

Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea.The price of a pineapple is $4 and the price of a bottle of green tea is $2.The table below shows Arnie's utility values.Use the table to answer the questions that follow the table.
   
a.Complete the table by filling in the blank spaces.
b.Suppose Arnold purchases 4 pineapples and 2 bottles of green tea.Is he consuming the optimal consumption bundle? If so, explain why.If not, what combination should he buy and why?

Accepted Answer

a.
 @#IMG-DLM& b.If Arnold purchases 4 pineapples

Question 8

If total utility increases at a decreasing rate as a consumer consumes more coffee, then marginal utility must

Accepted Answer

A) remains constant. 
B) increase also. 
C) decrease. 
D) be negative. 
A) remains constant. 
B) increase also. 
C) decrease. 
D) be negative.

Question 9

Optimal decisions are made

Accepted Answer

A) in the marketplace. 
B) if information about prices and marginal utilities is known. 
C) when marginal utility is minimized. 
D) at the margin. 
A) in the marketplace. 
B) if information about prices and marginal utilities is known. 
C) when marginal utility is minimized. 
D) at the margin.

Question 10

If Ewan is consuming his utility maximizing bundle and the price of one good falls, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do?

Accepted Answer

A) MU/P has increased and Ewan should buy more of this good. 
B) MU/P has increased and Ewan should buy less of this good. 
C) MU/P has decreased and Ewan should buy more of this good. 
D) MU/P has decreased and Ewan should buy less of this good. 
A) MU/P has increased and Ewan should buy more of this good. 
B) MU/P has increased and Ewan should buy less of this good. 
C) MU/P has decreased and Ewan should buy more of this good. 
D) MU/P has decreased and Ewan should buy less of this good.

Question 11

One possible reason as to why consumers respond to sales is that by displaying a "high" regular price and a "low" sale price, sales provide consumers with a reference point to interpret the prices being offered.

Accepted Answer

A) True 
 B)False

Question 12

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.Suppose Keira's income increases from $18 to $23 but prices have not changed.What is her utility maximizing bundle now?

Accepted Answer

A) 6 cups of soup and 5 sandwiches 
B) 4 cups of soup and 5 sandwiches 
C) 5 cups of soup and 4 sandwiches 
D) 5 cups of soup and 5 sandwiches 
A) 6 cups of soup and 5 sandwiches 
B) 4 cups of soup and 5 sandwiches 
C) 5 cups of soup and 4 sandwiches 
D) 5 cups of soup and 5 sandwiches

Question 13

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 14

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 price of ________, there is a surplus of tickets.

Accepted Answer

A) $0 
B) between $0 and $10 
C) $10 
D) $25 
A) $0 
B) between $0 and $10 
C) $10 
D) $25

Question 15

In making decisions about what to consume, a person's goal is to

Accepted Answer

A) allocate her limited income among all the products she wishes to buy so that she receives the highest total utility. 
B) buy low-priced goods rather than high-priced goods. 
C) maximize her marginal utility from the goods and services she wishes to buy using her limited income. 
D) consume as many necessities as possible and then, if there is money left over, to buy luxuries. 
A) allocate her limited income among all the products she wishes to buy so that she receives the highest total utility. 
B) buy low-priced goods rather than high-priced goods. 
C) maximize her marginal utility from the goods and services she wishes to buy using her limited income. 
D) consume as many necessities as possible and then, if there is money left over, to buy luxuries.

Question 16

Explain the concept of network externalities.

Accepted Answer

A network externality is a sit

Question 17

Figure 10-2
   
Figure 10-2 represents the demand for ice cream cones.
-Refer to Figure 10-2.When the price of ice cream cones increases from $2 to $3, quantity demanded decreases from 4 ice cream cones to 3 ice cream cones.This change in quantity demanded is due to

Accepted Answer

A) the price and output effects. 
B) the income and substitution effects. 
C) the law of diminishing marginal utility. 
D) the fact that marginal willingness to pay falls. 
A) the price and output effects. 
B) the income and substitution effects. 
C) the law of diminishing marginal utility. 
D) the fact that marginal willingness to pay falls.

Question 18

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.Which diagram demonstrates a decrease in total utility following an increase in the price of candy?

Accepted Answer

A) the movement from e to d in Panel A 
B) the movement from g to f in Panel B 
C) the movement from k to h in Panel C 
D) none of the above 
A) the movement from e to d in Panel A 
B) the movement from g to f in Panel B 
C) the movement from k to h in Panel C 
D) none of the above

Question 19

The income effect due to a price decrease will result in an increase in the quantity demanded for

Accepted Answer

A) a Giffen good. 
B) an inferior good. 
C) a public good. 
D) a normal good. 
A) a Giffen good. 
B) an inferior good. 
C) a public good. 
D) a normal good.

Question 20

The economic model of consumer behavior predicts that

Accepted Answer

A) consumers will try to earn as much income as they can over their lifetimes. 
B) consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy. 
C) consumers will try to accumulate as many goods and services as they can before they die. 
D) consumers divide their time between consumption and leisure activities in order to maximize social welfare. 
A) consumers will try to earn as much income as they can over their lifetimes. 
B) consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy. 
C) consumers will try to accumulate as many goods and services as they can before they die. 
D) consumers divide their time between consumption and leisure activities in order to maximize social welfare.

Total utility is constant along a given indifference curve.

Goods with upward sloping demand curves are referred to as

Studies on consumer behavior have found that most people value fairness enough that they will refuse to participate in transactions they consider unfair, even if they are worse off as a result.How does this affect a firm's decision to raise prices in the event of a temporary increase in demand?

The income effect of an increase in the price of salmon

Firms pay famous individuals to endorse their products because

If total utility increases at a decreasing rate as a consumer consumes more coffee, then marginal utility must

Optimal decisions are made

If Ewan is consuming his utility maximizing bundle and the price of one good falls, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do?

One possible reason as to why consumers respond to sales is that by displaying a "high" regular price and a "low" sale price, sales provide consumers with a reference point to interpret the prices being offered.

Giffen goods

In making decisions about what to consume, a person's goal is to

Explain the concept of network externalities.

Figure 10-2 Figure 10-2 represents the demand for ice cream cones. -Refer to Figure 10-2.When the price of ice cream cones increases from $2 to $3, quantity demanded decreases from 4 ice cream cones to 3 ice cream cones.This change in quantity demanded is due to

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.Which diagram demonstrates a decrease in total utility following an increase in the price of candy?

The income effect due to a price decrease will result in an increase in the quantity demanded for

The economic model of consumer behavior predicts that

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

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Exam 10: Consumer Choice and Behavioral Economics

Total utility is constant along a given indifference curve.

Goods with upward sloping demand curves are referred to as

Studies on consumer behavior have found that most people value fairness enough that they will refuse to participate in transactions they consider unfair, even if they are worse off as a result.How does this affect a firm's decision to raise prices in the event of a temporary increase in demand?

The income effect of an increase in the price of salmon

Firms pay famous individuals to endorse their products because

If total utility increases at a decreasing rate as a consumer consumes more coffee, then marginal utility must

Optimal decisions are made

If Ewan is consuming his utility maximizing bundle and the price of one good falls, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do?

One possible reason as to why consumers respond to sales is that by displaying a "high" regular price and a "low" sale price, sales provide consumers with a reference point to interpret the prices being offered.

Giffen goods

In making decisions about what to consume, a person's goal is to

Explain the concept of network externalities.

Figure 10-2 Figure 10-2 represents the demand for ice cream cones. -Refer to Figure 10-2.When the price of ice cream cones increases from $2 to $3, quantity demanded decreases from 4 ice cream cones to 3 ice cream cones.This change in quantity demanded is due to

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.Which diagram demonstrates a decrease in total utility following an increase in the price of candy?

The income effect due to a price decrease will result in an increase in the quantity demanded for

The economic model of consumer behavior predicts that

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