Question 1

Consider a downward-sloping demand curve.When the price of an inferior good increases, the income and substitution effects

Accepted Answer

A) work in the same direction to increase quantity demanded. 
B) work in the same direction to decrease quantity demanded. 
C) work in opposite directions and quantity demanded increases. 
D) work in opposite directions and quantity demanded decreases. 
A) work in the same direction to increase quantity demanded. 
B) work in the same direction to decrease quantity demanded. 
C) work in opposite directions and quantity demanded increases. 
D) work in opposite directions and quantity demanded decreases.

Question 2

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card, even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?

Accepted Answer

The processing companies are taking adva

Question 3

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

Accepted Answer

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

Question 4

The observation that people tend to value something more highly when they own it than when they don't is called the

Accepted Answer

A) wealth effect. 
B) endowment effect. 
C) path-dependent effect. 
D) endorsement effect. 
A) wealth effect. 
B) endowment effect. 
C) path-dependent effect. 
D) endorsement effect.

Question 5

Figure 10-10
  
-Refer to Figure 10-10.Consider the budget constraint BC₁.If the price of DVDs is $20 and the price of CDs is $10, what is the consumer's income?

Accepted Answer

A) $120 
B) $240 
C) $360 
D) $480 
A) $120 
B) $240 
C) $360 
D) $480

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

If preferences are transitive, indifference curves

Accepted Answer

A) intersect at the equilibrium consumption bundle. 
B) intersect at the optimum consumption bundle. 
C) intersect where the marginal rate of substitution for each indifference curve is equal. 
D) do not intersect. 
A) intersect at the equilibrium consumption bundle. 
B) intersect at the optimum consumption bundle. 
C) intersect where the marginal rate of substitution for each indifference curve is equal. 
D) do not intersect.

Question 8

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 9

What is an indifference curve? Why can indifference curves never cross?

Accepted Answer

An indifference curve shows the combinat

Question 10

The economic model of consumer behavior explains how consumers' tastes and preferences are formed.

Accepted Answer

A) True 
 B)False

Question 11

Figure 10-9
  
-Refer to Figure 10-9.If the price of biscotti is $1.50 and the price of a cappuccino is $3.00, what is the slope of the budget constraint?

Accepted Answer

A) -2 
B) -(3.00 - 1.50)/(3.00 + 1.50)= -1/3 
C) -1/2 
D) The slope cannot be determined without the value of income. 
A) -2 
B) -(3.00 - 1.50)/(3.00 + 1.50)= -1/3 
C) -1/2 
D) The slope cannot be determined without the value of income.

Question 12

Table 10-6
   
Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 10-6.If Jay can eat all the burgers he wants for free, how many burgers will he consume?

Accepted Answer

A) 7 burgers 
B) 6 burgers 
C) 5 burgers 
D) 3 burgers 
A) 7 burgers 
B) 6 burgers 
C) 5 burgers 
D) 3 burgers

Question 13

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

Accepted Answer

A) True 
 B)False

Question 14

If the price of lattes, a normal good you enjoy, falls, then

Accepted Answer

A) the income and substitution effects offset each other but the price effect leads you to buy more lattes. 
B) both the income and substitution effects lead you to buy more lattes. 
C) the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more lattes purchased. 
D) the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more lattes purchased. 
A) the income and substitution effects offset each other but the price effect leads you to buy more lattes. 
B) both the income and substitution effects lead you to buy more lattes. 
C) the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more lattes purchased. 
D) the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more lattes purchased.

Question 15

The absolute value of the slope of the budget constraint is equal to

Accepted Answer

A) the marginal rate of substitution between the two goods in question. 
B) the price of good on the vertical axis divided by the price of the good on the horizontal axis. 
C) the price of good on the horizontal axis divided by the price of the good on the vertical axis. 
D) the quantity of the good on the vertical axis divided by the quantity of the good on the horizontal axis. 
A) the marginal rate of substitution between the two goods in question. 
B) the price of good on the vertical axis divided by the price of the good on the horizontal axis. 
C) the price of good on the horizontal axis divided by the price of the good on the vertical axis. 
D) the quantity of the good on the vertical axis divided by the quantity of the good on the horizontal axis.

Question 16

Economists have shown that when the ultimatum game experiment is carried out, both allocators and recipients act as if fairness is important.

Accepted Answer

A) True 
 B)False

Question 17

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other, similar products.These economists believe that

Accepted Answer

A) consumers are always rational. 
B) in practice, the gains from using a superior technology exceed the losses consumers incur from switching costs. 
C) there is no good evidence that switching costs exist. 
D) the government will prevent products with inferior technology from being sold to consumers. 
A) consumers are always rational. 
B) in practice, the gains from using a superior technology exceed the losses consumers incur from switching costs. 
C) there is no good evidence that switching costs exist. 
D) the government will prevent products with inferior technology from being sold to consumers.

Question 18

A common mistake made by consumers is the failure to take into account the sunk costs of their actions.

Accepted Answer

A) True 
 B)False

Question 19

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then Marlowe

Accepted Answer

A) is maximizing total utility. 
B) should buy more apples and fewer oranges. 
C) should buy more oranges and fewer apples. 
D) should buy fewer oranges and fewer apples. 
A) is maximizing total utility. 
B) should buy more apples and fewer oranges. 
C) should buy more oranges and fewer apples. 
D) should buy fewer oranges and fewer apples.

Question 20

Table 10-3
  
-Refer to Table 10-3.The table above shows Lee's marginal utility from consuming ice cream cones and cans of Lime Fizz Soda.Select the phrase that completes the following statement."We can determine the number of ice cream cones and cans of Lime Fizz Soda Lee should consume to maximize his utility

Accepted Answer

A) if we know what Lee's budget is." 
B) if we know what Lee's budget is and the price of an ice cream cone and the price of a can of Lime Fizz Soda." 
C) by adding up the marginal utilities for ice cream cones and Lime Fizz Soda." 
D) if we know the values of the marginal utility per dollar for ice cream cones and Lime Fizz Soda." 
A) if we know what Lee's budget is." 
B) if we know what Lee's budget is and the price of an ice cream cone and the price of a can of Lime Fizz Soda." 
C) by adding up the marginal utilities for ice cream cones and Lime Fizz Soda." 
D) if we know the values of the marginal utility per dollar for ice cream cones and Lime Fizz Soda."

Consider a downward-sloping demand curve.When the price of an inferior good increases, the income and substitution effects

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card, even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?

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

The observation that people tend to value something more highly when they own it than when they don't is called the

Figure 10-10 -Refer to Figure 10-10.Consider the budget constraint BC₁.If the price of DVDs is $20 and the price of CDs is $10, what is the consumer's income?

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

If preferences are transitive, indifference curves

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

What is an indifference curve? Why can indifference curves never cross?

The economic model of consumer behavior explains how consumers' tastes and preferences are formed.

Figure 10-9 -Refer to Figure 10-9.If the price of biscotti is $1.50 and the price of a cappuccino is $3.00, what is the slope of the budget constraint?

Table 10-6 Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1. -Refer to Table 10-6.If Jay can eat all the burgers he wants for free, how many burgers will he consume?

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

If the price of lattes, a normal good you enjoy, falls, then

The absolute value of the slope of the budget constraint is equal to

Economists have shown that when the ultimatum game experiment is carried out, both allocators and recipients act as if fairness is important.

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other, similar products.These economists believe that

A common mistake made by consumers is the failure to take into account the sunk costs of their actions.

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then Marlowe

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

Consider a downward-sloping demand curve.When the price of an inferior good increases, the income and substitution effects

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card, even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?

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

The observation that people tend to value something more highly when they own it than when they don't is called the

Figure 10-10 -Refer to Figure 10-10.Consider the budget constraint BC₁.If the price of DVDs is $20 and the price of CDs is $10, what is the consumer's income?

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

If preferences are transitive, indifference curves

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

What is an indifference curve? Why can indifference curves never cross?

The economic model of consumer behavior explains how consumers' tastes and preferences are formed.

Figure 10-9 -Refer to Figure 10-9.If the price of biscotti is $1.50 and the price of a cappuccino is $3.00, what is the slope of the budget constraint?

Table 10-6 Table 10-6 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1. -Refer to Table 10-6.If Jay can eat all the burgers he wants for free, how many burgers will he consume?

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

If the price of lattes, a normal good you enjoy, falls, then

The absolute value of the slope of the budget constraint is equal to

Economists have shown that when the ultimatum game experiment is carried out, both allocators and recipients act as if fairness is important.

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other, similar products.These economists believe that

A common mistake made by consumers is the failure to take into account the sunk costs of their actions.

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then Marlowe

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