Exam 10: Consumer Choice and Behavioral Economics

Figure 10-9 -Refer to Figure 10-9.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?

The demand curve for a Giffen good is

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.What is Keira's marginal utility per dollar spent on the third cup of soup?

Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time.In less than a week she discovered that the shoes were uncomfortable.Grace went back to wearing her old pair and stashed away the new pair.When asked by her boss, Mme.Ramotswe, why does she not simply give away the new pair, she said: "But I paid so much for them." Grace's behavior

We can derive the market demand curve for gold earrings

In the ultimatum game, allocators usually offer recipients at least a 40 percent share of the money, and recipients almost always reject offers of less than a 10 percent share.Which of the following does not explain why allocators offer recipients a relatively generous share and why recipients reject meager offers?

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?

What is the marginal rate of substitution?

Traditionally, economists have considered culture, customs, and religion as

Figure 10-5 -Refer to Figure 10-5.The consumer can afford consumption bundles

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

The slope of the indifference curve is referred to as

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?

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

Wilbur Rickhiser, a financial advisor, recently told one of his clients: "The biggest mistake you can make is to hold onto a stock for too long in order to avoid a loss.Let's say you bought a stock for $50 per share but that six months later the price fell to $40 after a poor earnings report.Many of my clients in this situation will hold the stock, hoping the price will later rise above $50.In most cases like this the price does not rise and may even fall.You must know when to cut your losses." Which of the following is the best explanation for Rickhiser's advice?

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is maximized.

An increase in income results in an outward shift of an indifference curve.

Arnold Kim began blogging about Apple products during his fourth year of medical school.Kim's Website, MacRumors.com, became so successful that he decided to give up his medical career and work full time on his Website, despite the nearly $200,000 he had invested in his education.In making his decision, Kim decided to ignore the money and time he spent on his education.Economists would say that Kim made a

Suppose Joe is maximizing total utility within his budget constraint.If the price of the last pair of jeans purchased is $25 and it yields 100 units of extra satisfaction and the price of the last shirt purchased is $20, then, using the rule of equal marginal utility per dollar spent, the extra satisfaction received from the last shirt must be

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 second candy bar is