Question 1

A budget constraint

Accepted Answer

A) represents the bundles of consumption that make a consumer equally happy. 
B) refers to the limited amount of income available to consumers to spend on goods and services. 
C) reflects the desire by consumers to increase their income. 
D) shows the prices that a consumer chooses to pay for products he consumes. 
A) represents the bundles of consumption that make a consumer equally happy. 
B) refers to the limited amount of income available to consumers to spend on goods and services. 
C) reflects the desire by consumers to increase their income. 
D) shows the prices that a consumer chooses to pay for products he consumes.

Question 2

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 an example of

Accepted Answer

A) rational consumer behavior. 
B) the endowment effect. 
C) the fallacy of composition. 
D) the failure to ignore sunk costs. 
A) rational consumer behavior. 
B) the endowment effect. 
C) the fallacy of composition. 
D) the failure to ignore sunk costs.

Question 3

Sunk costs

Accepted Answer

A) are costs associated with repairing something you already own. 
B) are important for optimal decision making. 
C) are costs that have already been paid and cannot be recaptured in any significant way. 
D) are costs that firms sink into marketing. 
A) are costs associated with repairing something you already own. 
B) are important for optimal decision making. 
C) are costs that have already been paid and cannot be recaptured in any significant way. 
D) are costs that firms sink into marketing.

Question 4

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.What is Jay's optimal consumption bundle?

Accepted Answer

A) 1 burger and 2 cans of Pepsi 
B) 2 burgers and 3 cans of Pepsi 
C) 3 burgers and 1 can of Pepsi 
D) 3 burgers and 2 cans of Pepsi 
A) 1 burger and 2 cans of Pepsi 
B) 2 burgers and 3 cans of Pepsi 
C) 3 burgers and 1 can of Pepsi 
D) 3 burgers and 2 cans of Pepsi

Question 5

Which of the following describes the substitution effect of a price change?

Accepted Answer

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

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

All but one of the following economists were awarded a Nobel prize for their contributions to experimental economics and their explorations of the influence fairness has on consumer decision-making.Which economist did not receive a Nobel Prize for this work?

Accepted Answer

A) Vernon Smith 
B) Alan Krueger 
C) Daniel Kahneman 
D) Maurice Allais 
A) Vernon Smith 
B) Alan Krueger 
C) Daniel Kahneman 
D) Maurice Allais

Question 8

Consumers maximize total utility within their budget constraint by

Accepted Answer

A) buying the cheapest goods they can find. 
B) buying whatever they like the best. 
C) buying the goods with the largest marginal utility per dollar spent. 
D) spending the same dollar amount for each good. 
A) buying the cheapest goods they can find. 
B) buying whatever they like the best. 
C) buying the goods with the largest marginal utility per dollar spent. 
D) spending the same dollar amount for each good.

Question 9

What does the marginal rate of substitution measure?

Accepted Answer

A) It measures the rate at which a consumer must give up one good to purchase another good. 
B) It measures the rate at which a consumer will substitute one good for another when the price of one good changes. 
C) It measures the change in utility from consuming one additional unit of a good. 
D) It measures the rate at which a consumer is willing to trade off one product for another while keeping utility constant. 
A) It measures the rate at which a consumer must give up one good to purchase another good. 
B) It measures the rate at which a consumer will substitute one good for another when the price of one good changes. 
C) It measures the change in utility from consuming one additional unit of a good. 
D) It measures the rate at which a consumer is willing to trade off one product for another while keeping utility constant.

Question 10

The demand curve for an inferior good can never be downward sloping.

Accepted Answer

A) True 
 B)False

Question 11

The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

Accepted Answer

A) maximizing behavior. 
B) economizing behavior. 
C) the price constraint. 
D) the budget constraint. 
A) maximizing behavior. 
B) economizing behavior. 
C) the price constraint. 
D) the budget constraint.

Question 12

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Apocalypse.On the day of the movie you decide that you would rather not go to the movie.According to economists, what is the rational thing to do?

Accepted Answer

A) Since the cost of the movie ticket is a sunk cost, it should not influence your decision. Your decision should be based solely on whether you want to see the movie or not. 
B) You should not waste resources. Since you have paid for the ticket you should watch the movie. 
C) Your should go to the movie to minimize your losses. 
D) You should go to the movie to maximize your utility. 
A) Since the cost of the movie ticket is a sunk cost, it should not influence your decision. Your decision should be based solely on whether you want to see the movie or not. 
B) You should not waste resources. Since you have paid for the ticket you should watch the movie. 
C) Your should go to the movie to minimize your losses. 
D) You should go to the movie to maximize your utility.

Question 13

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 14

If Paul decides to buy a $60 ticket to a Cirque du Soleil show rather than a $45 ticket for a Blue Man Group performance, we can conclude that

Accepted Answer

A) the marginal utility per dollar spent on Cirque du Soleil is lower than the marginal utility per dollar spent on Blue Man Group. 
B) Paul's demand for a ticket to see Cirque du Soleil is more elastic than his demand for a ticket to see Blue Man Group. 
C) Paul is not making a rational choice. 
D) the marginal utility per dollar spent on Cirque du Soleil is higher than the marginal utility per dollar spent on Blue Man Group. 
A) the marginal utility per dollar spent on Cirque du Soleil is lower than the marginal utility per dollar spent on Blue Man Group. 
B) Paul's demand for a ticket to see Cirque du Soleil is more elastic than his demand for a ticket to see Blue Man Group. 
C) Paul is not making a rational choice. 
D) the marginal utility per dollar spent on Cirque du Soleil is higher than the marginal utility per dollar spent on Blue Man Group.

Question 15

Figure 10-1
  
-Refer to Figure 10-1.Which of the following statements is true?

Accepted Answer

A) Quantities Q₀ and Q₁ are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B) Quantities Q₀ and Q₁ may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C) Quantity Q₀ could be a utility-maximizing choice if the price is $5.75, but quantity Q₁ may not be because we have no information on the marginal utility per dollar when price changes. 
D) Quantities Q₀ and Q₁ are derived independently of the utility-maximizing model. 
A) Quantities Q₀ and Q₁ are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B) Quantities Q₀ and Q₁ may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C) Quantity Q₀ could be a utility-maximizing choice if the price is $5.75, but quantity Q₁ may not be because we have no information on the marginal utility per dollar when price changes. 
D) Quantities Q₀ and Q₁ are derived independently of the utility-maximizing model.

Question 16

Figure 10-3
  
-Refer to Figure 10-3.Best friends Laurel and Hardy both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

Accepted Answer

A) They have identical movie preferences. 
B) Hardy enjoys romantic comedies more than Laurel. 
C) Hardy enjoys science fiction movies more than Laurel. 
D) The diagrams do not provide any information about relative preferences. 
A) They have identical movie preferences. 
B) Hardy enjoys romantic comedies more than Laurel. 
C) Hardy enjoys science fiction movies more than Laurel. 
D) The diagrams do not provide any information about relative preferences.

Question 17

Figure 10-2
   
Figure 10-2 represents the demand for ice cream cones.
-Refer to Figure 10-2.Which of the following statements is true?

Accepted Answer

A) Points a and b are the utility-maximizing quantities of ice cream cones at two different prices of ice cream. 
B) Points a and b may not necessarily be the utility-maximizing quantities of ice cream cones at two different prices because we have no information on the consumer's budget or the price of other goods. 
C) Point a could be a utility-maximizing choice if the price is $3 but point b may not be because we have no information on the marginal utility per dollar when price changes. 
D) Points a and b are derived independently of the utility-maximizing model. 
A) Points a and b are the utility-maximizing quantities of ice cream cones at two different prices of ice cream. 
B) Points a and b may not necessarily be the utility-maximizing quantities of ice cream cones at two different prices because we have no information on the consumer's budget or the price of other goods. 
C) Point a could be a utility-maximizing choice if the price is $3 but point b may not be because we have no information on the marginal utility per dollar when price changes. 
D) Points a and b are derived independently of the utility-maximizing model.

Question 18

In a survey of consumers, Daniel Kaheman, Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to

Accepted Answer

A) go out of business because a larger hardware store opened in the same city; 82 percent of those surveyed believed it was unfair for the larger store to compete with the smaller store. 
B) raise the price of snow shovels the day following a snowstorm; 82 percent of those surveyed believed this was unfair. 
C) sell tickets to sporting and cultural events at prices higher than prices paid at the ticket windows for the same events; 82 percent of those surveyed believed this was unfair. 
D) remain in business even though the store was not making an economic profit; 82 percent of those surveyed believed it would be unfair for the store to go out of business if there were no other hardware stores in the same area. 
A) go out of business because a larger hardware store opened in the same city; 82 percent of those surveyed believed it was unfair for the larger store to compete with the smaller store. 
B) raise the price of snow shovels the day following a snowstorm; 82 percent of those surveyed believed this was unfair. 
C) sell tickets to sporting and cultural events at prices higher than prices paid at the ticket windows for the same events; 82 percent of those surveyed believed this was unfair. 
D) remain in business even though the store was not making an economic profit; 82 percent of those surveyed believed it would be unfair for the store to go out of business if there were no other hardware stores in the same area.

Question 19

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 20

The iPod is a product without any significant network externalities.

Accepted Answer

A) True 
 B)False

A budget constraint

Sunk costs

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.What is Jay's optimal consumption bundle?

Which of the following describes the substitution effect of a price change?

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

All but one of the following economists were awarded a Nobel prize for their contributions to experimental economics and their explorations of the influence fairness has on consumer decision-making.Which economist did not receive a Nobel Prize for this work?

Consumers maximize total utility within their budget constraint by

What does the marginal rate of substitution measure?

The demand curve for an inferior good can never be downward sloping.

The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Apocalypse.On the day of the movie you decide that you would rather not go to the movie.According to economists, what is the rational thing to do?

If Paul decides to buy a $60 ticket to a Cirque du Soleil show rather than a $45 ticket for a Blue Man Group performance, we can conclude that

Figure 10-1 -Refer to Figure 10-1.Which of the following statements is true?

Figure 10-3 -Refer to Figure 10-3.Best friends Laurel and Hardy both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

Figure 10-2 Figure 10-2 represents the demand for ice cream cones. -Refer to Figure 10-2.Which of the following statements is true?

In a survey of consumers, Daniel Kaheman, Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to

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

The iPod is a product without any significant network externalities.

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

A budget constraint

Sunk costs

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.What is Jay's optimal consumption bundle?

Which of the following describes the substitution effect of a price change?

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

All but one of the following economists were awarded a Nobel prize for their contributions to experimental economics and their explorations of the influence fairness has on consumer decision-making.Which economist did not receive a Nobel Prize for this work?

Consumers maximize total utility within their budget constraint by

What does the marginal rate of substitution measure?

The demand curve for an inferior good can never be downward sloping.

The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Apocalypse.On the day of the movie you decide that you would rather not go to the movie.According to economists, what is the rational thing to do?

If Paul decides to buy a $60 ticket to a Cirque du Soleil show rather than a $45 ticket for a Blue Man Group performance, we can conclude that

Figure 10-1 -Refer to Figure 10-1.Which of the following statements is true?

Figure 10-3 -Refer to Figure 10-3.Best friends Laurel and Hardy both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

Figure 10-2 Figure 10-2 represents the demand for ice cream cones. -Refer to Figure 10-2.Which of the following statements is true?

In a survey of consumers, Daniel Kaheman, Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to

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

The iPod is a product without any significant network externalities.

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