Exam 6: Consumer Choice and Behavioural Economics

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioural economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

The slope of an indifference curve

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

Results of the ultimatum game indicate that most people value fairness enough that they will refuse to participate in a transaction they consider unfair, even if they are worse off financially as a result.

Why do convex indifference curves have a negative slope?

Under Big W's everyday low pricing policy, the everyday low prices

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card, even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like? __________________________________________________________________________________________________________________________________________________________________________________________

Table 6.7 Table 6.7 shows Antonio's utility from beer and pizza. -Refer to Table 6.7.Antonio's marginal utility from consuming the fifth beer is

The endowment effect is the tendency of people to be unwilling to sell a good they already own even if they are offered a price greater than they would be willing to pay to buy the good if they did not already own it.

What must be true in terms of the income effect, the substitution effect, and the type of good for the good's demand curve to be upward sloping? __________________________________________________________________________________________________________________________________________________________________________________________

A consumer's budget constraint is

Behavioural economics refers to the study of situations

What is the substitution effect of an increase in the price of peaches?

If preferences are transitive, indifference curves

Figure 6.3 -Refer to Figure 6.3.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 6.5 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 6-5. -Refer to Figure 6.5.Suppose the price of Pilates sessions rises 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

Marginal utility can be

A consumer's utility-maximising combination of goods is given by the bundle that corresponds to the point on

A consumer's indifference curves can never cross.