Question 1

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.

Question 2

The income effect of a price change refers to

Accepted Answer

A) the change in demand that occurs when consumer income changes. 
B) the change in the quantity demanded that results from a change in price, making the good more or less expensive relative to other goods, holding everything else constant. 
C) the change in demand that occurs when both income and price change. 
D) the change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant. 
A) the change in demand that occurs when consumer income changes. 
B) the change in the quantity demanded that results from a change in price, making the good more or less expensive relative to other goods, holding everything else constant. 
C) the change in demand that occurs when both income and price change. 
D) the change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant.

Question 3

Figure 10-7
   
Manuri has $300 to spend on Pilates classes and Yoga classes.The price of a group Pilates class is $20 and the price of a group Yoga class is $10.Manuri's optimal bundle is given by "A" in Figure 10-7.
-Refer to Figure 10-7.Suppose the price of Pilates sessions rise to $30 while income and the price of Yoga sessions remain unchanged.The substitution effect of this price change is represented by the movement from

Accepted Answer

A)  A to B. 
B)  A to C. 
C) A to D. 
D) D to B. 
A)  A to B. 
B)  A to C. 
C) A to D. 
D) D to B.

Question 4

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 5

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

Accepted Answer

Network externalities can create signifi

Question 6

Psychologists Daniel Kahneman and Amos Tversky conducted the following experiments by asking a sample of people the following questions:
Scenario A: "Imagine that you have decided to see a play and paid the admission price of $10 per ticket.As you enter the theater you discover that you have lost the ticket.The seat was not marked and the ticket cannot be recovered.Would you pay $10 for another ticket?"
Scenario B: "Imagine that you have decided to see a play where admission is $10 per ticket.As you enter the theater you discover that you have lost a $10 bill.Would you still pay $10 for a ticket for the play?"
As long as additional tickets are available, there's no meaningful difference between losing $10 in cash before buying a ticket, and losing the $10 ticket after buying it.In both cases, you are out $10.Yet, far more subjects (88 percent)in Scenario B say they would pay $10 for another ticket and see the play while in Scenario A, only 46 percent of the subjects say they would be willing to spend another $10 to see the play.
Which of the following is the best explanation for the results of the experiment?

Accepted Answer

A) The endowment effect applies in Scenario A since people already own the ticket and therefore it is more valuable but this is not so in Scenario B. 
B) In Scenario B, people had not anticipated spending an additional $10 so in effect the price of the ticket is $20 and not $10 whereas in Scenario A, the price of the ticket is still $10. 
C) In Scenario A, people make an immediate connection between the lost ticket and the play and feel poorer by incorrectly assigning a greater value to the value of the ticket whereas in Scenario B, they do not make the connection between the lost $10 bill and the play. 
D) The net benefit derived from watching the play is lower in Scenario A where the effective cost is $20 compared to the net benefit in Scenario B. 
A) The endowment effect applies in Scenario A since people already own the ticket and therefore it is more valuable but this is not so in Scenario B. 
B) In Scenario B, people had not anticipated spending an additional $10 so in effect the price of the ticket is $20 and not $10 whereas in Scenario A, the price of the ticket is still $10. 
C) In Scenario A, people make an immediate connection between the lost ticket and the play and feel poorer by incorrectly assigning a greater value to the value of the ticket whereas in Scenario B, they do not make the connection between the lost $10 bill and the play. 
D) The net benefit derived from watching the play is lower in Scenario A where the effective cost is $20 compared to the net benefit in Scenario B.

Question 7

Figure 10-6
   
The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy.
-Refer to Figure 10-6.A change in the price of candy only 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 8

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

Accepted Answer

A) income effect only or substitution effect only but not both effects 
B) income and substitution effects 
C) price effect 
D) consumption effect 
A) income effect only or substitution effect only but not both effects 
B) income and substitution effects 
C) price effect 
D) consumption effect

Question 9

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 evidence of

Accepted Answer

A) the high value fans place on watching the Super Bowl in person, rather than on television. 
B) the failure of consumers to take into account nonmonetary opportunity costs. 
C) the failure of consumers to ignore sunk costs. 
D) consumers being overly optimistic about their future behavior. 
A) the high value fans place on watching the Super Bowl in person, rather than on television. 
B) the failure of consumers to take into account nonmonetary opportunity costs. 
C) the failure of consumers to ignore sunk costs. 
D) consumers being overly optimistic about their future behavior.

Question 10

The quantity of tickets demanded to the Super Bowl is always greater than the quantity supplied.Which of the following in the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?

Accepted Answer

A) Raising the price would reduce the demand for tickets; there would then be a surplus and the game would not sell out. 
B) The cost of raising the price and printing new tickets would exceed the revenue the NFL would receive from higher ticket prices. 
C) The demand for Super Bowl tickets is elastic; raising the price would reduce total revenue. 
D) The NFL is concerned that raising ticket prices would be considered unfair. 
A) Raising the price would reduce the demand for tickets; there would then be a surplus and the game would not sell out. 
B) The cost of raising the price and printing new tickets would exceed the revenue the NFL would receive from higher ticket prices. 
C) The demand for Super Bowl tickets is elastic; raising the price would reduce total revenue. 
D) The NFL is concerned that raising ticket prices would be considered unfair.

Question 11

Uber uses what is known as surge pricing to set prices based on the number of people who request rides at a given time in a given area.Based on this pricing method, prices will

Accepted Answer

A) fall when supply decreases. 
B) rise when supply increases. 
C) rise when demand increases. 
D) rise when demand decreases. 
A) fall when supply decreases. 
B) rise when supply increases. 
C) rise when demand increases. 
D) rise when demand decreases.

Question 12

If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the third candy bar is

Accepted Answer

A) 25 utility units. 
B) 20 utility units. 
C) 5 utility units. 
D) unknown as more information is needed to determine the answer. 
A) 25 utility units. 
B) 20 utility units. 
C) 5 utility units. 
D) unknown as more information is needed to determine the answer.

Question 13

The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears.To maximize his utility, what should Harold do?

Accepted Answer

A) He should acquire more income so that he can afford to buy more oranges and pears. 
B) He should reduce his consumption of both oranges and pears so that he can buy a greater variety of goods. 
C) He should buy fewer pears and more oranges. 
D) He should buy fewer oranges and more pears. 
A) He should acquire more income so that he can afford to buy more oranges and pears. 
B) He should reduce his consumption of both oranges and pears so that he can buy a greater variety of goods. 
C) He should buy fewer pears and more oranges. 
D) He should buy fewer oranges and more pears.

Question 14

Utility is

Accepted Answer

A) easily measured in units called utils. 
B) subjective and difficult to measure. 
C) the consumption of a quasi-public good like electricity or natural gas. 
D) the production of a quasi-public good like electricity or natural gas. 
A) easily measured in units called utils. 
B) subjective and difficult to measure. 
C) the consumption of a quasi-public good like electricity or natural gas. 
D) the production of a quasi-public good like electricity or natural gas.

Question 15

Uber has come under criticism for its surge pricing because consumers see it as

Accepted Answer

A) more fair for firms to raise prices after an increase in demand than as a result of an increase in costs. 
B) equally fair for firms to raise prices after an increase in costs and as a result of an increase in demand. 
C) completely unfair for firms to raise prices after an increase in costs or as a result of an increase in demand. 
D) more fair for firms to raise prices after an increase in costs than as a result of an increase in demand. 
A) more fair for firms to raise prices after an increase in demand than as a result of an increase in costs. 
B) equally fair for firms to raise prices after an increase in costs and as a result of an increase in demand. 
C) completely unfair for firms to raise prices after an increase in costs or as a result of an increase in demand. 
D) more fair for firms to raise prices after an increase in costs than as a result of an increase in demand.

Question 16

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 17

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 18

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

Accepted Answer

A) True 
 B)False

Question 19

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 20

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility

Accepted Answer

A) rises. 
B) is constant. 
C) declines. 
D) fluctuates. 
A) rises. 
B) is constant. 
C) declines. 
D) fluctuates.

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

The income effect of a price change refers to

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

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

Figure 10-6 The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy. -Refer to Figure 10-6.A change in the price of candy only is shown in

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

The quantity of tickets demanded to the Super Bowl is always greater than the quantity supplied.Which of the following in the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?

Uber uses what is known as surge pricing to set prices based on the number of people who request rides at a given time in a given area.Based on this pricing method, prices will

If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the third candy bar is

The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears.To maximize his utility, what should Harold do?

Utility is

Uber has come under criticism for its surge pricing because consumers see it as

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

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

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility

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 More Realistic Setting

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

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

The income effect of a price change refers to

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

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

Figure 10-6 The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy. -Refer to Figure 10-6.A change in the price of candy only is shown in

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

The quantity of tickets demanded to the Super Bowl is always greater than the quantity supplied.Which of the following in the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?

Uber uses what is known as surge pricing to set prices based on the number of people who request rides at a given time in a given area.Based on this pricing method, prices will

If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the third candy bar is

The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears.To maximize his utility, what should Harold do?

Utility is

Uber has come under criticism for its surge pricing because consumers see it as

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

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

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility

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 More Realistic Setting

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