Question 1

Economists assume that the goal of consumers is to

Accepted Answer

A)  do as little work as possible to survive. 
B)  make themselves as well off as possible. 
C)  spend all their income. 
D)  consume as much as possible. 
A)  do as little work as possible to survive. 
B)  make themselves as well off as possible. 
C)  spend all their income. 
D)  consume as much as possible.

Question 2

If Lisa spends her income on veggie burgers and pints of soy milk and the price of veggie burgers is three times the price of a pint of soy milk,then when Lisa maximizes her utility she will buy

Accepted Answer

A)  both goods until the marginal utility of veggie burgers is three times the marginal utility of soy milk. 
B)  three times as many veggie burgers as pints of soy milk. 
C)  three times as many pints of soy milk as veggie burgers. 
D)  both goods until the marginal utility of a pint of soy milk is three times the marginal utility of veggie burgers. 
A)  both goods until the marginal utility of veggie burgers is three times the marginal utility of soy milk. 
B)  three times as many veggie burgers as pints of soy milk. 
C)  three times as many pints of soy milk as veggie burgers. 
D)  both goods until the marginal utility of a pint of soy milk is three times the marginal utility of veggie burgers.

Question 3

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

Identify the one statement that does not demonstrate how social effects influence consumer choice.

Accepted Answer

A)  Students in an Economics class are required to purchase a textbook assigned by the professor. 
B)  There is utility gained from consuming goods or services that others are consuming. 
C)  Some products that people consume are determined by the social popularity of the products. 
D)  Companies such as Zappos.com and Netflix invite their consumers to write reviews about their experience with their products which are then posted on the internet for others to see. 
A)  Students in an Economics class are required to purchase a textbook assigned by the professor. 
B)  There is utility gained from consuming goods or services that others are consuming. 
C)  Some products that people consume are determined by the social popularity of the products. 
D)  Companies such as Zappos.com and Netflix invite their consumers to write reviews about their experience with their products which are then posted on the internet for others to see.

Question 6

Marv Pilson has $50 worth of groceries in a shopping cart at his local Shop 'n Save.Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv's cart equals 50.The marginal utility per dollar of the boxes of cereal in Marv's cart equals 20.Marv has only $50 to spend,but has not yet paid for his groceries.How can Marv increase his total utility without spending more than $50?

Accepted Answer

A)  Marv should substitute his favorite soft drink or the cereal in his cart for generic brands that have lower prices. 
B)  Marv should buy more boxes of cereal and fewer bottles of soft drink. 
C)  Marv should buy fewer boxes of cereal and more bottles of soft drink. 
D)  Marv should buy fewer boxes of cereal and fewer bottles of soft drink. He can then spend more on other items. 
A)  Marv should substitute his favorite soft drink or the cereal in his cart for generic brands that have lower prices. 
B)  Marv should buy more boxes of cereal and fewer bottles of soft drink. 
C)  Marv should buy fewer boxes of cereal and more bottles of soft drink. 
D)  Marv should buy fewer boxes of cereal and fewer bottles of soft drink. He can then spend more on other items.

Question 7

Tickets for the Los Angeles production of the musical 'Hamilton' sold out quickly after going on sale in April. These tickets, sold through the box office at the Pantages Theater and through authorized seller Ticketmaster, were priced as low as $85 for mezzanine seats and $125 for orchestra seats. Once the tickets sold out, the only available seats for the musical which ran from August 11 through December 30, were through ticket resellers such as StubHub and SeatGeek, with tickets selling at an average price of $467 to $510. Ticket prices were the most expensive for August dates, with an average price of $624, and fell for dates in the following months, with December prices averaging $335.
Source: Nicholas Cheng, "Don't have a ticket to 'Hamilton' yet? It's going to cost you," Los Angeles Times, August 19, 2017.
-Refer to the Article Summary.How would the Pantages Theater know if it was operating on the elastic portion of the demand curve for 'Hamilton' tickets?

Accepted Answer

A)  If they increased ticket prices and the total revenue from ticket sales increased. 
B)  If they increased ticket prices and the total revenue from ticket sales did not change. 
C)  If they increased ticket prices and the total revenue from ticket sales decreased. 
D)  If they decreased ticket prices and the total revenue from ticket sales did not change. 
A)  If they increased ticket prices and the total revenue from ticket sales increased. 
B)  If they increased ticket prices and the total revenue from ticket sales did not change. 
C)  If they increased ticket prices and the total revenue from ticket sales decreased. 
D)  If they decreased ticket prices and the total revenue from ticket sales did not change.

Question 8

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free-market equilibrium price in the market for milk?

Accepted Answer

A)  Sales revenue falls. 
B)  Sales revenue rises. 
C)  Sales revenue remains unchanged. 
D)  It cannot be determined without information on prices. 
A)  Sales revenue falls. 
B)  Sales revenue rises. 
C)  Sales revenue remains unchanged. 
D)  It cannot be determined without information on prices.

Question 9

Table 7-3
 $\begin{array}{|c|c|c|}
\hline & \text { Ice Cream Cones } & \text { Lime Fizz Soda } \
\hline \text { Quantity } & M U & M U \
\hline 1 & 30 & 40 \
\hline 2 & 25 & 35 \
\hline 3 & 20 & 26 \
\hline 4 & 15 & 18 \
\hline 5 & 10 & 15 \
\hline 6 & 5 & 7 \
\hline
\end{array}$
-Refer to Table 7-3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda.The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1.Use this information to select the correct statement.

Accepted Answer

A)  We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his budget is. 
B)  To maximize his utility Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda. 
C)  We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee's utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity. 
D)  If Lee has an unlimited budget he will maximize his utility by buying only Lime Fizz Soda. 
A)  We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his budget is. 
B)  To maximize his utility Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda. 
C)  We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee's utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity. 
D)  If Lee has an unlimited budget he will maximize his utility by buying only Lime Fizz Soda.

Question 10

The use of celebrities endorsements can be a good way to promote a brand, as long as the brand fits the celebrity. The article discusses three reasons why a company should use celebrity endorsements:
1. Celebrities have a large range of followers, giving them the ability to build brand equity which created product differentiation to consumers.
2. Companies can reach a global audience since celebrities have worldwide fan bases, and an endorsement can link the product to a celebrity's skills, making fans feel closer to and more like the celebrity.
3. Celebrity endorsements increase consumers' awareness of a product, since consumers are more likely to remember an ad linked to a celebrity.
However, not all celebrities are the right fit for all products. Endorsements can backfire if the celebrities are promoting something they would never use, giving the impression of nothing more than a sponsored advertisement.
Source: Erika Warne, "Why Brands Should Use Celebrity Endorsements," weareanthology.com, April 20, 2017.
-Refer to the Article Summary.One explanation for the increase in product sales because of celebrity endorsements is that people seem to receive ________ from goods they believe are popular.

Accepted Answer

A)  more utility 
B)  diminishing utility 
C)  greater network externalities 
D)  increased path dependency 
A)  more utility 
B)  diminishing utility 
C)  greater network externalities 
D)  increased path dependency

Question 11

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

Accepted Answer

A)  Sales revenue falls by less than 5 percent. 
B)  Sales revenue remains unchanged. 
C)  Sales revenue falls by 100 percent. 
D)  It cannot be determined without information on prices. 
A)  Sales revenue falls by less than 5 percent. 
B)  Sales revenue remains unchanged. 
C)  Sales revenue falls by 100 percent. 
D)  It cannot be determined without information on prices.

Question 12

The demand curve for a Giffen good is

Accepted Answer

A)  non-linear but downward sloping. 
B)  vertical. 
C)  upward sloping. 
D)  nonexistent. 
A)  non-linear but downward sloping. 
B)  vertical. 
C)  upward sloping. 
D)  nonexistent.

Question 13

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Accepted Answer

Price elasticity of demand measures the

Question 14

Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true?

Accepted Answer

A)  It is inelastic at high prices and elastic at low prices. 
B)  It is unit elastic throughout the demand curve. 
C)  It is elastic at the highest prices and inelastic at the lowest prices. 
D)  It is perfectly elastic at very high prices and perfectly inelastic at very low prices. 
A)  It is inelastic at high prices and elastic at low prices. 
B)  It is unit elastic throughout the demand curve. 
C)  It is elastic at the highest prices and inelastic at the lowest prices. 
D)  It is perfectly elastic at very high prices and perfectly inelastic at very low prices.

Question 15

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

Accepted Answer

A) True 
 B)False

Question 16

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 17

The enjoyment or satisfaction people receive from consuming goods and services is called utility.

Accepted Answer

A) True 
 B)False

Question 18

Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea.The price of a pineapple is $4 and the price of a bottle of green tea is $2.The table below shows Arnie's utility values.Use the table to answer the questions that follow the table.
 $\begin{array}{|c|c|c|c|c|c|c|c|}
\hline  \begin{array}{c}
\text { Quantity } \
\text { of } \
\text { Pineapples }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility per } \
\text { Dollar }
\end{array} & \begin{array}{c}
\text { Quantity } \
\text { of Green } \
\text { Tea }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility per } \
\text { Dollar }
\end{array} \
\hline 1 & 32 & & & 1 & 28 & & \
\hline 2 & 52 & & & 2 & 46 & & \
\hline 3 & 64 & & & 3 & 54 & & \
\hline 4 & 68 & & & 4 & 60 & & \
\hline 5 & 70 & & & 5 & 64 & & \
\hline 6 & 71 & & & 6 & 66 & & \
\hline 7 & 71 & & & 7 & 67 & & \
\hline
\end{array}$ 
a.Complete the table by filling in the blank spaces.
b.Suppose Arnold purchases 4 pineapples and 2 bottles of green tea.Is he consuming the optimal consumption bundle? If so,explain why.If not,what combination should he buy and why?

Accepted Answer

a.
   b∙If Arnold purchases 4 pineapples

Question 19

Suppose at the current price,the demand for copper is estimated at -3.14.What happens to sales revenue if the government imposes a price ceiling slightly below the free market equilibrium price in the copper market?

Accepted Answer

A)  Sales revenue falls. 
B)  Sales revenue rises. 
C)  Sales revenue remains unchanged because copper is a necessity for most industries. 
D)  It cannot be determined without information on prices. 
A)  Sales revenue falls. 
B)  Sales revenue rises. 
C)  Sales revenue remains unchanged because copper is a necessity for most industries. 
D)  It cannot be determined without information on prices.

Question 20

An item has utility for a consumer if it

Accepted Answer

A)  is scarce. 
B)  has a high price. 
C)  is something everyone else wants. 
D)  generates enjoyment or satisfaction. 
A)  is scarce. 
B)  has a high price. 
C)  is something everyone else wants. 
D)  generates enjoyment or satisfaction.

Economists assume that the goal of consumers is to

If Lisa spends her income on veggie burgers and pints of soy milk and the price of veggie burgers is three times the price of a pint of soy milk,then when Lisa maximizes her utility she will buy

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

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

Identify the one statement that does not demonstrate how social effects influence consumer choice.

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free-market equilibrium price in the market for milk?

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

The demand curve for a Giffen good is

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true?

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

Marginal utility is the

The enjoyment or satisfaction people receive from consuming goods and services is called utility.

Suppose at the current price,the demand for copper is estimated at -3.14.What happens to sales revenue if the government imposes a price ceiling slightly below the free market equilibrium price in the copper market?

An item has utility for a consumer if it

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Exam 7: Consumer Choice and Elasticity

Economists assume that the goal of consumers is to

If Lisa spends her income on veggie burgers and pints of soy milk and the price of veggie burgers is three times the price of a pint of soy milk,then when Lisa maximizes her utility she will buy

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

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

Identify the one statement that does not demonstrate how social effects influence consumer choice.

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free-market equilibrium price in the market for milk?

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

The demand curve for a Giffen good is

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true?

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

Marginal utility is the

The enjoyment or satisfaction people receive from consuming goods and services is called utility.

Suppose at the current price,the demand for copper is estimated at -3.14.What happens to sales revenue if the government imposes a price ceiling slightly below the free market equilibrium price in the copper market?

An item has utility for a consumer if it

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters