Question 1

Which of the following does not explain why consumers buy products that many other consumers are already buying?

Accepted Answer

A)  technology 
B)  the satisfaction people derive by being viewed as 'fashionable' 
C)  cost-effective way to gather information about a product 
D)  differences in tastes and preferences 
A)  technology 
B)  the satisfaction people derive by being viewed as 'fashionable' 
C)  cost-effective way to gather information about a product 
D)  differences in tastes and preferences

Question 2

A Giffen good could be either a normal good or an inferior good.

Accepted Answer

A) True 
 B)False

Question 3

Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping. A logical reason for this is that the decline in fuel prices ________ the supply of airline tickets while at the same time the demand for airline tickets ________, so airline ticket prices still increased.

Accepted Answer

A)  decreased; increased 
B)  decreased; decreased 
C)  increased; increased 
D)  increased; decreased 
A)  decreased; increased 
B)  decreased; decreased 
C)  increased; increased 
D)  increased; decreased

Question 4

Describe the demand curve for a Giffen good.

Accepted Answer

The demand curve for a Giffen

Question 5

One reason that consumers and businesses might not act rationally is

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 6

An economist observes two consumers in a supermarket. One of the consumers buys a case of Coca-Cola and the other buys a case of Pepsi-Cola. Both colas sell for the same price and the ages and incomes of the consumers are also the same. Based on this information, how would the economist explain the consumers' choices?

Accepted Answer

A)  One of the consumers made the wrong choice, but it is impossible to say which one. 
B)  Both consumers should have considered buying other colas that had lower prices. 
C)  Both consumers should have purchased less than a case because they would be able to buy more later. 
D)  Apparently, the consumers had different tastes. 
A)  One of the consumers made the wrong choice, but it is impossible to say which one. 
B)  Both consumers should have considered buying other colas that had lower prices. 
C)  Both consumers should have purchased less than a case because they would be able to buy more later. 
D)  Apparently, the consumers had different tastes.

Question 7

The economic model of consumer behaviour explains how consumers' tastes and preferences are formed.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Explain the concept of network externalities.

Accepted Answer

A network externality is a sit

Question 10

-Refer to Figure 6-7. If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC2?

Accepted Answer

A)  $8 
B)  $10 
C)  $20 
D)  $40 
A)  $8 
B)  $10 
C)  $20 
D)  $40

Question 11

Which of the following is used to explain why a consumer's willingness to buy Microsoft Office increases as the number of other people who use Microsoft Office increases?

Accepted Answer

A)  network externalities 
B)  market failure 
C)  diminishing marginal utility 
D)  the income effect of a price change 
A)  network externalities 
B)  market failure 
C)  diminishing marginal utility 
D)  the income effect of a price change

Question 12

The demand curve for a luxury good is upward sloping.

Accepted Answer

A) True 
 B)False

Question 13

The order of the letters along the rows of computer keyboards could be changed to allow users to type faster, but this would inconvenience the vast majority of people who learned to type with the current keyboard layout. The costs of switching to a new layout make this change unlikely. This is an example of

Accepted Answer

A)  path dependency. 
B)  how social influences overwhelm the substitution effect of a price change. 
C)  how the elasticity of demand for typewriters has been affected by externalities. 
D)  how consumers sometimes do not behave rationally. 
A)  path dependency. 
B)  how social influences overwhelm the substitution effect of a price change. 
C)  how the elasticity of demand for typewriters has been affected by externalities. 
D)  how consumers sometimes do not behave rationally.

Question 14

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of

Accepted Answer

A)  the law of demand. 
B)  the law of supply. 
C)  the law of increasing marginal opportunity cost. 
D)  the law of diminishing marginal utility. 
A)  the law of demand. 
B)  the law of supply. 
C)  the law of increasing marginal opportunity cost. 
D)  the law of diminishing marginal utility.

Question 15

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 favourite 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 favourite 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 16

Along a downward-sloping linear demand curve

Accepted Answer

A)  the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase. 
B)  the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities remain constant. 
C)  the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases. 
D)  the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remains constant. 
A)  the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase. 
B)  the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities remain constant. 
C)  the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases. 
D)  the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remains constant.

Question 17

The income effect of a price increase causes a decrease in the quantity demanded of a normal good.

Accepted Answer

A) True 
 B)False

Question 18

Costs that have already been incurred, and which cannot be recovered, are known as

Accepted Answer

A)  short-run fixed costs. 
B)  implicit costs. 
C)  unavoidable costs. 
D)  sunk costs. 
A)  short-run fixed costs. 
B)  implicit costs. 
C)  unavoidable costs. 
D)  sunk costs.

Question 19

Behavioural economics helps explain why customers ________ at Big W.

Accepted Answer

A)  favoured the policy of everyday low prices and not sales and coupons 
B)  favoured sales and coupons and not the policy of everyday low prices 
C)  were equally happy with sales and coupons and the policy of everyday low prices 
D)  responded negatively to both sales and coupons and the policy of everyday low prices 
A)  favoured the policy of everyday low prices and not sales and coupons 
B)  favoured sales and coupons and not the policy of everyday low prices 
C)  were equally happy with sales and coupons and the policy of everyday low prices 
D)  responded negatively to both sales and coupons and the policy of everyday low prices

Question 20

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Days of Future Past. On the day of the movie you decide that you would rather not go to the movie. According to economists, what is the rational thing to do?

Accepted Answer

A)  Since the cost of the movie ticket is a sunk cost, it should not influence your decision. Your decision should be based solely on whether you want to see the movie or not. 
B)  You should not waste resources. Since you have paid for the ticket you should watch the movie. 
C)  Your should go to the movie to minimise your losses. 
D)  You should go to the movie to maximise your utility. 
A)  Since the cost of the movie ticket is a sunk cost, it should not influence your decision. Your decision should be based solely on whether you want to see the movie or not. 
B)  You should not waste resources. Since you have paid for the ticket you should watch the movie. 
C)  Your should go to the movie to minimise your losses. 
D)  You should go to the movie to maximise your utility.

Which of the following does not explain why consumers buy products that many other consumers are already buying?

A Giffen good could be either a normal good or an inferior good.

Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping. A logical reason for this is that the decline in fuel prices the supply of airline tickets while at the same time the demand for airline tickets , so airline ticket prices still increased.

Describe the demand curve for a Giffen good.

One reason that consumers and businesses might not act rationally is

The economic model of consumer behaviour explains how consumers' tastes and preferences are formed.

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

Explain the concept of network externalities.

-Refer to Figure 6-7. If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC₂?

Which of the following is used to explain why a consumer's willingness to buy Microsoft Office increases as the number of other people who use Microsoft Office increases?

The demand curve for a luxury good is upward sloping.

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of

Along a downward-sloping linear demand curve

The income effect of a price increase causes a decrease in the quantity demanded of a normal good.

Costs that have already been incurred, and which cannot be recovered, are known as

Behavioural economics helps explain why customers ________ at Big W.

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Days of Future Past. On the day of the movie you decide that you would rather not go to the movie. According to economists, what is the rational thing to do?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : 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 Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 6: Concumer Choice and Behavioural Economics

Which of the following does not explain why consumers buy products that many other consumers are already buying?

A Giffen good could be either a normal good or an inferior good.

Describe the demand curve for a Giffen good.

One reason that consumers and businesses might not act rationally is

The economic model of consumer behaviour explains how consumers' tastes and preferences are formed.

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

Explain the concept of network externalities.

-Refer to Figure 6-7. If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC2?

Which of the following is used to explain why a consumer's willingness to buy Microsoft Office increases as the number of other people who use Microsoft Office increases?

The demand curve for a luxury good is upward sloping.

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of

Along a downward-sloping linear demand curve

The income effect of a price increase causes a decrease in the quantity demanded of a normal good.

Costs that have already been incurred, and which cannot be recovered, are known as

Behavioural economics helps explain why customers ________ at Big W.

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Days of Future Past. On the day of the movie you decide that you would rather not go to the movie. According to economists, what is the rational thing to do?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : 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 Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

-Refer to Figure 6-7. If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC₂?