Question 1

Avner is maximizing total utility by buying sports magazines and protein supplements.For him to buy more sports magazines

Accepted Answer

A) the price of protein supplements. has to fall. 
B) the price of sports magazines has to fall. 
C) the price of sports magazines has to rise. 
D) Since Avner is maximizing his utility, nothing can change the consumption of sports magazines. 
A) the price of protein supplements. has to fall. 
B) the price of sports magazines has to fall. 
C) the price of sports magazines has to rise. 
D) Since Avner is maximizing his utility, nothing can change the consumption of sports magazines.

Question 2

Explain the endowment effect.

Accepted Answer

The endowment effect refers to the tende

Question 3

Behavioral economics helps explain why customers ________ at J.C.Penney.

Accepted Answer

A) favored the policy of everyday low prices and not sales and coupons 
B) favored sales and coupons and not the policy of everyday low prices 
C) were equally happy with sales and coupons and the policy of everyday low prices 
D) responded negatively to both sales and coupons and the policy of everyday low prices 
A) favored the policy of everyday low prices and not sales and coupons 
B) favored sales and coupons and not the policy of everyday low prices 
C) were equally happy with sales and coupons and the policy of everyday low prices 
D) responded negatively to both sales and coupons and the policy of everyday low prices

Question 4

Professor Parallax chooses two students in his economics class, Jasmine and Cassandra, to participate in the ultimatum game.He chooses Jasmine to be the allocator and Cassandra to be the recipient.He gives Jasmine $50 and as the allocator, she gets to decide how to split the money with Cassandra.If Cassandra decides to accept the amount allocated to her by Jasmine, both students get to keep the money.If Cassandra decides to reject her allocation, neither student gets to keep the money.How much will each student end up with if each student acts as if fairness is important? How much will each student end up with if only Cassandra acts as if fairness is important? How much will each student end up with if neither student cares about fairness?

Accepted Answer

If both students care about fairness, ea

Question 5

Consider the following hypothetical scenarios:
Scenario A: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.The sales attendant at the store tells you that the pair of jeans you wish to buy is on sale for $160 at another store, located about a 20-minute drive away.
Scenario B: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.The sales attendant at the store tells you that the t-shirt you wish to buy is on sale for $30 at another store, located about a 20-minute drive away.
Based on standard economic theory, under which scenario would you make the 20-minute trip to the other store?

Accepted Answer

A) Scenario A because the pair of jeans is a very expensive item and $15 saving is quite substantial 
B) Scenario B because a $15 saving amounts to a substantial discount (about 33 percent) 
C) in either scenario if I think a $15 savings is worth the 20-minute trip 
D) in none of these scenarios if I think the $15 saving is not worth the 20-minute trip 
E) C and D are correct answers. 
A) Scenario A because the pair of jeans is a very expensive item and $15 saving is quite substantial 
B) Scenario B because a $15 saving amounts to a substantial discount (about 33 percent) 
C) in either scenario if I think a $15 savings is worth the 20-minute trip 
D) in none of these scenarios if I think the $15 saving is not worth the 20-minute trip 
E) C and D are correct answers.

Question 6

Grant has $200 to spend each month on restaurant meals and jazz performances at his
neighborhood jazz club.The price of a typical restaurant meal is $20 and the price of a jazz performance ticket is $10.Grant is maximizing his utility by consuming 6 restaurant meals and attending 8 jazz performances.Suppose Grant still has $200 to spend, but the price of restaurant meal rises to $25, while the price of jazz performance ticket drops to $8.Can it be determined if Grant is better off or worse off than he was before the price change? Use a budget constraint/indifference curve graph to illustrate your answer.

Accepted Answer

Initially, when the price of a typical r

Question 7

What is an indifference curve?

Accepted Answer

A) It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods. 
B) It is a curve that shows the combinations of consumption bundles that give the consumer the same utility. 
C) It is a curve that ranks a consumer's preference for various consumption bundles. 
D) It is a curve that shows the tradeoff a consumer faces among different combinations of consumption bundles. 
A) It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods. 
B) It is a curve that shows the combinations of consumption bundles that give the consumer the same utility. 
C) It is a curve that ranks a consumer's preference for various consumption bundles. 
D) It is a curve that shows the tradeoff a consumer faces among different combinations of consumption bundles.

Question 8

Marginal utility is

Accepted Answer

A) the change in total utility divided by the price of the last unit of a good or service consumed. 
B) the change in total utility a person receives from consuming an additional unit of a good or service. 
C) the utility from consuming a given quantity of a good or service. 
D) the decrease in total utility from consuming more and more units of a good or service. 
A) the change in total utility divided by the price of the last unit of a good or service consumed. 
B) the change in total utility a person receives from consuming an additional unit of a good or service. 
C) the utility from consuming a given quantity of a good or service. 
D) the decrease in total utility from consuming more and more units of a good or service.

Question 9

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 10

List three reasons why the 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 11

Table 10-4
  
-Refer to Table 10-4.For steak and cheese sandwiches and grilled chicken sandwiches, the table contains the values of the marginal utility (MU)and marginal utility per dollar (MU/P)for Mabel Jarvis.Mabel has $14 to spend on steak and cheese sandwiches and grilled chicken sandwiches.Which of the following statements is true?

Accepted Answer

A) If Mabel maximizes her utility, she will buy three steak and cheese sandwiches and two grilled chicken sandwiches. 
B) If Mabel was maximizing her utility when spending $14 and then received an additional $4, she would receive the most marginal utility per dollar if her next purchase was another grilled chicken sandwich. 
C) Mabel will first buy two steak and cheese sandwiches; then with her remaining $6 she will buy three grilled chicken sandwiches. 
D) To maximize her utility, Mabel will need a total of $36, the income needed to buy 6 steak and cheese sandwiches and 6 grilled chicken sandwiches. 
A) If Mabel maximizes her utility, she will buy three steak and cheese sandwiches and two grilled chicken sandwiches. 
B) If Mabel was maximizing her utility when spending $14 and then received an additional $4, she would receive the most marginal utility per dollar if her next purchase was another grilled chicken sandwich. 
C) Mabel will first buy two steak and cheese sandwiches; then with her remaining $6 she will buy three grilled chicken sandwiches. 
D) To maximize her utility, Mabel will need a total of $36, the income needed to buy 6 steak and cheese sandwiches and 6 grilled chicken sandwiches.

Question 12

A standard which came to the market first, such as the QWERTY letter layout in typewriters, can become entrenched (this layout is still used for computer keyboards today).What is this phenomenon called?

Accepted Answer

A) network externalities 
B) path dependency 
C) sunk cost 
D) comparative advantage 
A) network externalities 
B) path dependency 
C) sunk cost 
D) comparative advantage

Question 13

What is the marginal rate of substitution?

Accepted Answer

A) the price ratio 
B) the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market 
C) the rate at which the consumer is willing to trade one good for another so that she increases her utility 
D) the rate at which the consumer is willing to trade one good for another without any loss in utility 
A) the price ratio 
B) the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market 
C) the rate at which the consumer is willing to trade one good for another so that she increases her utility 
D) the rate at which the consumer is willing to trade one good for another without any loss in utility

Question 14

You wish to buy only one CD.Use the rule of equal marginal utility per dollar to determine which one to purchase: (a)Drake's latest CD for $15 which gives you 75 units of utility, or (b)Bob Dylan's "Shadows in the Night" for $10 that gives you 100 units of utility?

Accepted Answer

You should buy the Bob Dylan C

Question 15

Total utility is maximized in the consumption of two goods by

Accepted Answer

A) equating the marginal utility for each good consumed. 
B) equating the marginal utility per dollar spent for each good consumed. 
C) equating the total utility of each good divided by its price. 
D) maximizing expenditure on each good. 
A) equating the marginal utility for each good consumed. 
B) equating the marginal utility per dollar spent for each good consumed. 
C) equating the total utility of each good divided by its price. 
D) maximizing expenditure on each good.

Question 16

The slope of the indifference curve is referred to as

Accepted Answer

A) the marginal rate of substitution. 
B) the price ratio. 
C) the marginal rate of consumption. 
D) the marginal tradeoff rate. 
A) the marginal rate of substitution. 
B) the price ratio. 
C) the marginal rate of consumption. 
D) the marginal tradeoff rate.

Question 17

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of

Accepted Answer

A) the law of demand. 
B) the law of supply. 
C) the law of increasing marginal opportunity cost. 
D) the law of diminishing marginal utility. 
A) the law of demand. 
B) the law of supply. 
C) the law of increasing marginal opportunity cost. 
D) the law of diminishing marginal utility.

Question 18

The average price of gasoline in your neighborhood is $2.15 per gallon.Your neighbor, Diana tells you that you can "save a lot" by frequenting a gas station 20 miles outside your neighborhood where the price of gasoline is $2.06 per gallon However, she cautions you that there are usually long lines at that station.Is her suggestion beneficial to you?

Accepted Answer

A) Yes, since gasoline is a necessity for car owners, the total cost savings would be relatively substantial. 
B) No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station. 
C) Yes, the lower price of gasoline at the rival station increases my purchasing power and enables me to consume more of other goods. 
D) No, my friend is misled; clearly, the lower-priced gasoline must be of inferior quality and could damage vehicles. 
A) Yes, since gasoline is a necessity for car owners, the total cost savings would be relatively substantial. 
B) No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station. 
C) Yes, the lower price of gasoline at the rival station increases my purchasing power and enables me to consume more of other goods. 
D) No, my friend is misled; clearly, the lower-priced gasoline must be of inferior quality and could damage vehicles.

Question 19

We can derive the market demand curve for gold earrings

Accepted Answer

A) only if the tastes of all gold earring consumers are similar. 
B) by adding horizontally the individual demand curves of each gold earring consumer. 
C) by adding vertically the quantity demanded of each gold earring consumed at each price. 
D) by adding the prices each gold earring consumer is willing to pay for each quantity. 
A) only if the tastes of all gold earring consumers are similar. 
B) by adding horizontally the individual demand curves of each gold earring consumer. 
C) by adding vertically the quantity demanded of each gold earring consumed at each price. 
D) by adding the prices each gold earring consumer is willing to pay for each quantity.

Question 20

Vinny consumes tacos and chicken wings.To keep his utility constant, he must consume more tacos if he consumes fewer chicken wings.This means that

Accepted Answer

A) Vinny's indifference curve for tacos and chicken wings must have a negative slope. 
B) the prices Vinny pays for tacos and chicken wings are always the same. 
C) Vinny's marginal utility from each good must be constant along his convex indifference curves for tacos and chicken wings. 
D) Vinny's marginal rate of substitution must be constant along his indifference curves for tacos and chicken wings. 
A) Vinny's indifference curve for tacos and chicken wings must have a negative slope. 
B) the prices Vinny pays for tacos and chicken wings are always the same. 
C) Vinny's marginal utility from each good must be constant along his convex indifference curves for tacos and chicken wings. 
D) Vinny's marginal rate of substitution must be constant along his indifference curves for tacos and chicken wings.

Avner is maximizing total utility by buying sports magazines and protein supplements.For him to buy more sports magazines

Explain the endowment effect.

Behavioral economics helps explain why customers ________ at J.C.Penney.

What is an indifference curve?

Marginal utility is

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

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

A standard which came to the market first, such as the QWERTY letter layout in typewriters, can become entrenched (this layout is still used for computer keyboards today).What is this phenomenon called?

What is the marginal rate of substitution?

You wish to buy only one CD.Use the rule of equal marginal utility per dollar to determine which one to purchase: (a)Drake's latest CD for $15 which gives you 75 units of utility, or (b)Bob Dylan's "Shadows in the Night" for $10 that gives you 100 units of utility?

Total utility is maximized in the consumption of two goods by

The slope of the indifference curve is referred to as

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of

We can derive the market demand curve for gold earrings

Vinny consumes tacos and chicken wings.To keep his utility constant, he must consume more tacos if he consumes fewer chicken wings.This means 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

Avner is maximizing total utility by buying sports magazines and protein supplements.For him to buy more sports magazines

Explain the endowment effect.

Behavioral economics helps explain why customers ________ at J.C.Penney.

What is an indifference curve?

Marginal utility is

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

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

A standard which came to the market first, such as the QWERTY letter layout in typewriters, can become entrenched (this layout is still used for computer keyboards today).What is this phenomenon called?

What is the marginal rate of substitution?

You wish to buy only one CD.Use the rule of equal marginal utility per dollar to determine which one to purchase: (a)Drake's latest CD for $15 which gives you 75 units of utility, or (b)Bob Dylan's "Shadows in the Night" for $10 that gives you 100 units of utility?

Total utility is maximized in the consumption of two goods by

The slope of the indifference curve is referred to as

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of

We can derive the market demand curve for gold earrings

Vinny consumes tacos and chicken wings.To keep his utility constant, he must consume more tacos if he consumes fewer chicken wings.This means 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