Question 1

The demand for a Giffen good slopes upward.

Accepted Answer

A) True 
 B)False  True

Question 2

If a consumer always buys goods rationally, then

Accepted Answer

A) the total utilities of the different goods consumed will be equal. 
B) the average utilities of the different goods consumed will be equal. 
C) the marginal utilities per dollar spent on all goods will be equal. 
D) the marginal utilities of the different goods consumed will be equal. 
A) the total utilities of the different goods consumed will be equal. 
B) the average utilities of the different goods consumed will be equal. 
C) the marginal utilities per dollar spent on all goods will be equal. 
D) the marginal utilities of the different goods consumed will be equal. C

Question 3

The iPod is a product without any significant network externalities.

Accepted Answer

A) True 
 B)False  False

Question 4

What is a significant downside to network externalities?

Accepted Answer

A) There may be large switching costs to consumers for changing products so that consumers end up using products with inferior technologies. 
B) Firms may network with unethical suppliers or distributors. 
C) The costs of hiring celebrity endorsements may be very high. 
D) There may be large switching costs to firms changing technologies. 
A) There may be large switching costs to consumers for changing products so that consumers end up using products with inferior technologies. 
B) Firms may network with unethical suppliers or distributors. 
C) The costs of hiring celebrity endorsements may be very high. 
D) There may be large switching costs to firms changing technologies.

Question 5

Most film processing companies have 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 do this knowing that most customers do not ask for refunds.This is an example of consumers

Accepted Answer

A) failing to ignore sunk costs. 
B) being overly optimistic about their future behaviour. 
C) not taking nonmonetary opportunity costs into account. 
D) not making themselves aware of the policy regarding refunds. 
A) failing to ignore sunk costs. 
B) being overly optimistic about their future behaviour. 
C) not taking nonmonetary opportunity costs into account. 
D) not making themselves aware of the policy regarding refunds.

Question 6

You wish to buy only one CD.Use the rule of equal marginal utility per dollar to determine which one to purchase: (a)Usher's latest CD for $15 which gives you 75 units of utility, or (b)Tom Petty and the Heartbreakers' Greatest Hits for $10 that gives you 100 units of utility?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

You should buy the Tom Petty C

Question 7

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility

Accepted Answer

A) rises. 
B) is constant. 
C) declines. 
D) fluctuates. 
A) rises. 
B) is constant. 
C) declines. 
D) fluctuates.

Question 8

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 9

For what type of good will the income effect due to a price decrease result in an increase in the quantity demanded?

Accepted Answer

A) A Giffen good. 
B) An inferior good. 
C) A public good. 
D) A normal good. 
A) A Giffen good. 
B) An inferior good. 
C) A public good. 
D) A normal good.

Question 10

Table 6.2   Table 6.2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods.
-Refer to Table 6.2.If Keira maximises her utility, she should buy

Accepted Answer

A) 1 cup of soup and 5 sandwiches 
B) 3 cups of soup and 4 sandwiches 
C) 6 cups of soup and 2 sandwiches 
D) 4 cups of soup and 3.5 sandwiches 
A) 1 cup of soup and 5 sandwiches 
B) 3 cups of soup and 4 sandwiches 
C) 6 cups of soup and 2 sandwiches 
D) 4 cups of soup and 3.5 sandwiches

Question 11

What is an indifference curve?

Accepted Answer

A) It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods. 
B) It is a curve that shows the combinations of consumption bundles that give the consumer the same utility. 
C) It is a curve that shows a consumer's preference for various consumption bundles. 
D) It is a curve that shows the trade-off a consumer faces among different combinations of consumption bundles. 
A) It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods. 
B) It is a curve that shows the combinations of consumption bundles that give the consumer the same utility. 
C) It is a curve that shows a consumer's preference for various consumption bundles. 
D) It is a curve that shows the trade-off a consumer faces among different combinations of consumption bundles.

Question 12

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

Accepted Answer

A) whether consumers care about fairness when they make decisions. 
B) whether consumers believe it is fair for producers to raise the price of a product for which there is excess demand. 
C) whether consumers understand the difference between implicit costs and explicit costs. 
D) whether consumers understand the rule of equal marginal utility per dollar spent. 
A) whether consumers care about fairness when they make decisions. 
B) whether consumers believe it is fair for producers to raise the price of a product for which there is excess demand. 
C) whether consumers understand the difference between implicit costs and explicit costs. 
D) whether consumers understand the rule of equal marginal utility per dollar spent.

Question 13

Consider the following hypothetical scenarios: Scenario A: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.The sales attendant at the store tells you that the pair of jeans you wish to buy is on sale for $160 at another store, located about a 20-minute drive away.
Scenario B: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.The sales attendant at the store tells you that the t-shirt you wish to buy is on sale for $30 at another store, located about a 20-minute drive away.
Based on standard economic theory, under which scenario would you make the 20-minute trip to the other store?

Accepted Answer

A) Scenario B because a $15 saving amounts to a substantial discount (about 33 per cent) 
B) in either scenario if I think a $15 savings is worth the 20-minute trip 
C) in none of these scenarios if I think the $15 saving is not worth the 20-minute trip 
D) B and C are correct answers. 
A) Scenario B because a $15 saving amounts to a substantial discount (about 33 per cent) 
B) in either scenario if I think a $15 savings is worth the 20-minute trip 
C) in none of these scenarios if I think the $15 saving is not worth the 20-minute trip 
D) B and C are correct answers.

Question 14

What is one reason that consumers and businesses might not act rationally?

Accepted Answer

A) It is difficult to obtain enough information about the elasticities of demand and supply. 
B) They may not realise their actions are inconsistent with their goals. 
C) Consumer tastes change constantly. 
D) They do not always value fairness when they make choices. 
A) It is difficult to obtain enough information about the elasticities of demand and supply. 
B) They may not realise their actions are inconsistent with their goals. 
C) Consumer tastes change constantly. 
D) They do not always value fairness when they make choices.

Question 15

All consumption bundles along a given indifference curve are equally desirable.

Accepted Answer

A) True 
 B)False

Question 16

Table 6.5  
-Refer to Table 6.5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for burgers and sushi rolls.Assume that the price of the burgers is $4 and the price of sushi rolls is $2.When Harry's income is $14 he buys two burgers and three sushi rolls.The last column lists the values of the marginal utility per dollar for sushi rolls when the price of sushi rolls decreases to $1.Complete this statement: As a result of the change in price,

Accepted Answer

A) Harry's purchasing power has increased.He will reduce his consumption of sushi rolls so he can buy one more burger.This is an example of the substitution effect of a price change. 
B) Harry's purchasing power has increased.If sushi rolls are a normal good for Harry, he will buy fewer sushi rolls.This is an example of the income effect of a price change. 
C) Harry's purchasing power has increased.If sushi rolls are a normal good for Harry he will buy more sushi rolls.This is an example of the income effect of a price change. 
D) Harry's purchasing power has increased.Harry buys fewer sushi rolls.This is an example of the substitution effect of a price change. 
A) Harry's purchasing power has increased.He will reduce his consumption of sushi rolls so he can buy one more burger.This is an example of the substitution effect of a price change. 
B) Harry's purchasing power has increased.If sushi rolls are a normal good for Harry, he will buy fewer sushi rolls.This is an example of the income effect of a price change. 
C) Harry's purchasing power has increased.If sushi rolls are a normal good for Harry he will buy more sushi rolls.This is an example of the income effect of a price change. 
D) Harry's purchasing power has increased.Harry buys fewer sushi rolls.This is an example of the substitution effect of a price change.

Question 17

Table 6.2   Table 6.2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods.
-Refer to Table 6.2.Holding prices constant, when Keira's income changed from $18 to $23, what happens to her total utility and to the marginal utilities of the last cup of soup and the last sandwich purchased?

Accepted Answer

A) Her total utility increases, but the marginal utilities of the last cup of soup and the last sandwich consumed decrease. 
B) Her total utility, the marginal utility of the last cup of soup consumed and the marginal utility of the last sandwich consumed all increase. 
C) Her total utility decreases, but the marginal utilities of the last cup of soup and the last sandwich consumed increase. 
D) Her total utility and the marginal utility of the last cup of soup consumed increase, but marginal utility of the last sandwich consumed decreases. 
A) Her total utility increases, but the marginal utilities of the last cup of soup and the last sandwich consumed decrease. 
B) Her total utility, the marginal utility of the last cup of soup consumed and the marginal utility of the last sandwich consumed all increase. 
C) Her total utility decreases, but the marginal utilities of the last cup of soup and the last sandwich consumed increase. 
D) Her total utility and the marginal utility of the last cup of soup consumed increase, but marginal utility of the last sandwich consumed decreases.

Question 18

Table 6.2   Table 6.2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods.
-Refer to Table 6.2.Holding prices constant, when Keira's income changed from $18 to $23, her utility maximising bundle changed.Based on your answers to her optimal choices at the two income levels, what type of goods are soup and sandwiches?

Accepted Answer

A) Soup is an inferior good and sandwiches are a normal good. 
B) Soup is a normal good and sandwiches are an inferior good. 
C) Both soup and sandwiches are normal goods. 
D) Both soup and sandwiches are inferior goods. 
A) Soup is an inferior good and sandwiches are a normal good. 
B) Soup is a normal good and sandwiches are an inferior good. 
C) Both soup and sandwiches are normal goods. 
D) Both soup and sandwiches are inferior goods.

Question 19

One reason university students do not study enough to get high grades is that they are unrealistic about their future behaviour.

Accepted Answer

A) True 
 B)False

Question 20

The demand curve for canned peas is downward sloping.If the price of canned peas, an inferior good, rises,

Accepted Answer

A) the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded. 
B) the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in quantity demanded. 
C) both the income and substitution effects reinforce each other to decrease the quantity demanded. 
D) the income and substitution effects offset each other, but the price effect of an inferior good leads you to buy more canned peas. 
A) the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded. 
B) the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in quantity demanded. 
C) both the income and substitution effects reinforce each other to decrease the quantity demanded. 
D) the income and substitution effects offset each other, but the price effect of an inferior good leads you to buy more canned peas.

The demand for a Giffen good slopes upward.

If a consumer always buys goods rationally, then

The iPod is a product without any significant network externalities.

What is a significant downside to network externalities?

Most film processing companies have 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 do this knowing that most customers do not ask for refunds.This is an example of consumers

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility

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

For what type of good will the income effect due to a price decrease result in an increase in the quantity demanded?

Table 6.2 Table 6.2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods. -Refer to Table 6.2.If Keira maximises her utility, she should buy

What is an indifference curve?

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

What is one reason that consumers and businesses might not act rationally?

All consumption bundles along a given indifference curve are equally desirable.

One reason university students do not study enough to get high grades is that they are unrealistic about their future behaviour.

The demand curve for canned peas is downward sloping.If the price of canned peas, an inferior good, rises,

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 6: Consumer Choice and Behavioural Economics

The demand for a Giffen good slopes upward.

If a consumer always buys goods rationally, then

The iPod is a product without any significant network externalities.

What is a significant downside to network externalities?

Most film processing companies have 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 do this knowing that most customers do not ask for refunds.This is an example of consumers

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility

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

For what type of good will the income effect due to a price decrease result in an increase in the quantity demanded?

Table 6.2 Table 6.2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods. -Refer to Table 6.2.If Keira maximises her utility, she should buy

What is an indifference curve?

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

What is one reason that consumers and businesses might not act rationally?

All consumption bundles along a given indifference curve are equally desirable.

One reason university students do not study enough to get high grades is that they are unrealistic about their future behaviour.

The demand curve for canned peas is downward sloping.If the price of canned peas, an inferior good, rises,

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters