Exam 10: Consumer Choice and Behavioral Economics

Health clubs typically experience an increase in one-year memberships in January, but many new customers cancel their memberships before the end of the year.Which of the following is the best explanation for this behavior?

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 a decrease in total utility following an increase in the price of candy?

Molly received an autographed poster of David Hasselhoff for her 21st birthday.Her friend Helga offered her $50 for the poster, but Molly refused to sell the poster even though she knows she would never pay that much to replace it if it was ever damaged or destroyed.Explain this inconsistency in Molly's behavior.

The substitution effect of a decrease in the price of movie tickets results in

Marginal utility is

The substitution effect of an increase in the price of peaches is

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

Optimal decisions are made

If your total satisfaction increases when you consume another unit, your marginal utility must be

Total utility

All of the following products are likely to have significant network externalities except

The demand curve for a luxury good is upward sloping.

Which of the following is explained by the law of diminishing marginal utility?

Goods with upward sloping demand curves are referred to as

Firms pay famous individuals to endorse their products because

During a study session for an economics exam with three other students, Peter Daltry commented on an example of a consumer who had to decide on number of slices of pizza and cups of Coca-Cola he would consume.Peter explained that "To maximize his utility this consumer must equate the marginal utility per dollar for pizza and Coca-Cola." Was Peter's analysis correct?

Suppose Adam Einberg pays $100 for a ticket to a new Broadway play and $100 was the maximum price he was willing to pay.On the day of the performance of the play Adam refuses to sell the ticket for $150.How would behavioral economists explain Adam's refusal to sell his ticket?

Some online penny auctions charge a fee, such as $1, for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

Marge buys 5 CDs and 7 DVDs.The marginal utility of the 5th CD and the marginal utility of the 7th DVD are both equal to 30 utils.Can we say that this is the optimal combination of CDs and DVDs for Marge?

Consider a downward-sloping demand curve.When the price of an inferior good increases, the income and substitution effects