Question 1

Consumers have to make tradeoffs in deciding what to consume because

Accepted Answer

A) not all goods give them the same amount of satisfaction. 
B) the prices of goods vary. 
C) they are limited by a budget constraint. 
D) there are not enough of all goods produced. 
A) not all goods give them the same amount of satisfaction. 
B) the prices of goods vary. 
C) they are limited by a budget constraint. 
D) there are not enough of all goods produced.

Question 2

A consumer's indifference curves can never cross.

Accepted Answer

A) True 
 B)False

Question 3

Marginal utility is the

Accepted Answer

A) total satisfaction received from consuming a given number of units of a product. 
B) average satisfaction received from consuming a product. 
C) extra satisfaction received from consuming one more unit of a product. 
D) satisfaction achieved when a consumer has had enough of a product. 
A) total satisfaction received from consuming a given number of units of a product. 
B) average satisfaction received from consuming a product. 
C) extra satisfaction received from consuming one more unit of a product. 
D) satisfaction achieved when a consumer has had enough of a product.

Question 4

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

Accepted Answer

A) the indifference curve that intersects the horizontal axis. 
B) the indifference curve that intersects the vertical axis. 
C) an indifference curve that is tangent to the budget constraint. 
D) the budget constraint where it intersects one of the axes. 
A) the indifference curve that intersects the horizontal axis. 
B) the indifference curve that intersects the vertical axis. 
C) an indifference curve that is tangent to the budget constraint. 
D) the budget constraint where it intersects one of the axes.

Question 5

Results of the ultimatum game indicate that most people value fairness enough that they will refuse to participate in a transaction they consider unfair, even if they are worse off financially as a result.

Accepted Answer

A) True 
 B)False

Question 6

Consider a downward-sloping demand curve.When the price of a normal good decreases, 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 7

Which of the following is used to explain why a consumer's willingness to buy a cell phone increases as the number of other people who own and use cell phones increases?

Accepted Answer

A) network externalities 
B) market failure 
C) diminishing marginal utility 
D) the income effect of a price change 
A) network externalities 
B) market failure 
C) diminishing marginal utility 
D) the income effect of a price change

Question 8

What is behavioral economics?

Accepted Answer

A) the study of how people make wealth-maximizing decisions 
B) the study of how people behave in the face of scarcity 
C) the study of situations in which people act in ways that are not economically rational 
D) the study of how people make decisions at the margin 
A) the study of how people make wealth-maximizing decisions 
B) the study of how people behave in the face of scarcity 
C) the study of situations in which people act in ways that are not economically rational 
D) the study of how people make decisions at the margin

Question 9

Lilly Davis has $5 per week to spend on any combination of ice cream and candy.The price of an ice cream cone is $2 and the price of a candy bar is $1.The table below shows Lilly'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 Lilly purchases 2 ice cream cones and 1 candy bar.Is she consuming the optimal consumption bundle? If so, explain why.If not, what combination should she buy and why?

Accepted Answer

a.
 @#IMG-DLM& 
b.If Lilly purchases 2 ice cream c

Question 10

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 11

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, the $200,000 he spent on his education

Accepted Answer

A) should be ignored since it represents a sunk cost. 
B) should be considered since it is money he has spent and needs to recoup. 
C) should be ignored only if Kim can earn more than $200,000 by running his Website. 
D) should be considered since it is money he could have used to invest in his Website. 
A) should be ignored since it represents a sunk cost. 
B) should be considered since it is money he has spent and needs to recoup. 
C) should be ignored only if Kim can earn more than $200,000 by running his Website. 
D) should be considered since it is money he could have used to invest in his Website.

Question 12

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

Accepted Answer

The two effects are the substitution and

Question 13

If you received negative marginal utility from consuming the 4th slice of pizza, then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

Accepted Answer

A) the fair trade principle 
B) the ultimatum game 
C) the preferential treatment game 
D) the behavioral experiment 
A) the fair trade principle 
B) the ultimatum game 
C) the preferential treatment game 
D) the behavioral experiment

Question 15

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

Accepted Answer

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

Question 16

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 17

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

Accepted Answer

A) True 
 B)False

Question 18

________ is an experiment that tests the significance of fairness in consumer decision making.

Accepted Answer

A) The fairness challenge 
B) The consumer choice paradigm 
C) The ultimatum game 
D) The Giffen paradox 
A) The fairness challenge 
B) The consumer choice paradigm 
C) The ultimatum game 
D) The Giffen paradox

Question 19

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 income 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 20

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.

Consumers have to make tradeoffs in deciding what to consume because

A consumer's indifference curves can never cross.

Marginal utility is the

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

Results of the ultimatum game indicate that most people value fairness enough that they will refuse to participate in a transaction they consider unfair, even if they are worse off financially as a result.

Consider a downward-sloping demand curve.When the price of a normal good decreases, the income and substitution effects

Which of the following is used to explain why a consumer's willingness to buy a cell phone increases as the number of other people who own and use cell phones increases?

What is behavioral economics?

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

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

If you received negative marginal utility from consuming the 4th slice of pizza, then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

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

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?

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

________ is an experiment that tests the significance of fairness in consumer decision making.

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 income is shown in

Giffen goods

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

Exam 10: Consumer Choice and Behavioral Economics

Consumers have to make tradeoffs in deciding what to consume because

A consumer's indifference curves can never cross.

Marginal utility is the

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

Results of the ultimatum game indicate that most people value fairness enough that they will refuse to participate in a transaction they consider unfair, even if they are worse off financially as a result.

Consider a downward-sloping demand curve.When the price of a normal good decreases, the income and substitution effects

Which of the following is used to explain why a consumer's willingness to buy a cell phone increases as the number of other people who own and use cell phones increases?

What is behavioral economics?

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

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

If you received negative marginal utility from consuming the 4th slice of pizza, then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

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

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?

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

________ is an experiment that tests the significance of fairness in consumer decision making.

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 income is shown in

Giffen goods

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