Exam 10: Consumer Choice and Behavioral Economics

Table 10-1 Keegan has $30 to spend on Pita Wraps and Bubble Tea.The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3.Table 10-1 shows his total utility from different quantities of the two items. -Refer to Table 10-1.If Keegan can drink all the bubble tea he wants for free, how many glasses will he consume?

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 income effect of this price change is represented by the movement from

The satisfaction a person receives from consuming goods and services is called

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

Economists have used the ultimatum game and the dictator game in experiments designed to determine

After getting an A on your economics exam, you decide to go to your favorite Mexican restaurant to celebrate.You are having trouble deciding whether to order the chipotle chicken chimichanga or the cilantro seafood enchiladas.Use the rule of equal marginal utility per dollar to determine which one to purchase: (a)the chimichanga for $8 which gives you 120 units of utility, or (b)the enchiladas for $15 which gives you 195 units of utility?

In an experiment that employed the dictator game, economists at Cornell University gave student "allocators" the option of dividing $20 in only two ways (a)$18 for themselves and $2 to another student, or (b)$10 for themselves and $10 to another student.What was one result from this experiment?

Before digital photography, most film processing companies had a policy of printing every picture on a roll of film and allowing customers to request a refund for pictures that were not clearly developed.The companies did this knowing that most customers did not ask for refunds.This was an example of consumers

An advantage of Microsoft Windows is its compatibility with the widest range of hardware and software.The dominance of Windows is self-reinforcing: hardware and software manufacturers ensure that their products are compatible with Windows in order to have access to the large number of Windows users.Which principle best describes this scenario?

Marginal utility can be

Figure 10-8 -Refer to Figure 10-8.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?

The income effect of a decrease in the price of legal services, a normal good, results in

If Joey Kobayashi experiences diminishing marginal utility from eating hot dogs then

Assume that you had a ticket for a basketball playoff game that you bought for $50, the maximum price you were willing to pay.If a friend of yours offers to buy the ticket for $100 but you decide not to sell it, how can your decision be explained?

You participate in a taste test for a new protein supplement called "Kapow." You are given five consecutive one ounce vials of the supplement and after consuming each vial you are asked to note your reaction.You consume the first vial and your response is: "Hmmm, quite good!" After the second, you say, "Not bad at all." After the third, you note, "It's alright." and after the fourth you wince, "No more, the after-taste is getting to me.I need water." What economic principle does this scenario illustrate? Define the principle.

Figure 10-1 -Refer to Figure 10-1.When the price of hoagies increases from $5.00 to $5.75, quantity demanded decreases from Q₁ to Q₀.This change in quantity demanded is due to A)the price and output effects. B)the income and substitution effects. C)the fact that marginal willingness to pay falls. D)the law of diminishing marginal utility.

Describe the demand curve for a Giffen good.

During its run on Broadway, the play The Producers regularly sold out all available tickets at the St.James Theater.The theater could have raised ticket prices from $75 to $125 and still sold all available tickets but chose not to do so.The best explanation for this decision is

Figure 10-5 -Refer to Figure 10-5.Suppose the price of pizza increases while the price of hamburger remains constant.Then, the consumer's

Figure 10-9 -Refer to Figure 10-9.If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC₂?