Question 1

Marginal utility is

Accepted Answer

A)  the change in total utility divided by the price of the last unit of a good or service consumed. 
B)  the change in total utility a person receives from consuming an additional unit of a good or service. 
C)  the utility from consuming a given quantity of a good or service. 
D)  the decrease in total utility from consuming more and more units of a good or service. 
A)  the change in total utility divided by the price of the last unit of a good or service consumed. 
B)  the change in total utility a person receives from consuming an additional unit of a good or service. 
C)  the utility from consuming a given quantity of a good or service. 
D)  the decrease in total utility from consuming more and more units of a good or service.

Question 2

-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?

Accepted Answer

A)  They have identical movie preferences. 
B)  Hardy enjoys romantic comedies more than Laurel. 
C)  Hardy enjoys science fiction movies more than Laurel. 
D)  The diagrams do not provide any information about relative preferences. 
A)  They have identical movie preferences. 
B)  Hardy enjoys romantic comedies more than Laurel. 
C)  Hardy enjoys science fiction movies more than Laurel. 
D)  The diagrams do not provide any information about relative preferences.

Question 3

Economists assume people's tastes are identical.

Accepted Answer

A) True 
 B)False

Question 4

Arnold Kim began blogging about Apple products during his fourth year of medical school. Kim's website, MacRumors.com, became so successful that he decided to give up his medical career and work full time on his website, despite the nearly $200 000 he had invested in his education. In making his decision, Kim decided to ignore the money and time he spent on his education. Economists would say that Kim made a

Accepted Answer

A)  rational decision to ignore these sunk costs. 
B)  poor decision since he had already invested his time and money on his medical career. 
C)  poor decision since doctors are in greater demand than bloggers. 
D)  hasty decision by not waiting to recoup his financial investment before giving up his medical career. 
A)  rational decision to ignore these sunk costs. 
B)  poor decision since he had already invested his time and money on his medical career. 
C)  poor decision since doctors are in greater demand than bloggers. 
D)  hasty decision by not waiting to recoup his financial investment before giving up his medical career.

Question 5

If preferences are transitive, indifference curves

Accepted Answer

A)  intersect at the equilibrium consumption bundle. 
B)  intersect at the optimum consumption bundle. 
C)  intersect where the marginal rate of substitution for each indifference curve is equal. 
D)  do not intersect. 
A)  intersect at the equilibrium consumption bundle. 
B)  intersect at the optimum consumption bundle. 
C)  intersect where the marginal rate of substitution for each indifference curve is equal. 
D)  do not intersect.

Question 6

The amount of income a consumer has to spend on goods and services is known as

Accepted Answer

A)  purchasing power. 
B)  effective demand. 
C)  a budget constraint. 
D)  wealth. 
A)  purchasing power. 
B)  effective demand. 
C)  a budget constraint. 
D)  wealth.

Question 7

One possible reason as to why consumers respond to sales is that by displaying a 'high' regular price and a 'low' sale price, sales provide consumers with a reference point to interpret the prices being offered.

Accepted Answer

A) True 
 B)False

Question 8

In their surveys of consumers, Daniel Kahneman, Jack Knetsch and Richard Thaler found that

Accepted Answer

A)  most people considered it unfair for firms to raise their prices because of an increase in their costs, but fair to raise their prices after an increase in demand. 
B)  most people considered any increase in price to be unfair, as it led to an increase in profits. 
C)  most people believed that low income people were hurt most by increases in prices. 
D)  most people considered an increase in price by firms following an increase in their costs to be fair but believed it was unfair for firms to raise their prices because of an increase in demand. 
A)  most people considered it unfair for firms to raise their prices because of an increase in their costs, but fair to raise their prices after an increase in demand. 
B)  most people considered any increase in price to be unfair, as it led to an increase in profits. 
C)  most people believed that low income people were hurt most by increases in prices. 
D)  most people considered an increase in price by firms following an increase in their costs to be fair but believed it was unfair for firms to raise their prices because of an increase in demand.

Question 9

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.

Question 10

What is an indifference curve? Why can indifference curves never cross?

Accepted Answer

An indifference curve shows the combinat

Question 11

-Refer to Figure 6-3. The Bobsey twins, 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?

Accepted Answer

A)  They have identical movie preferences. 
B)  Laurel enjoys romantic comedies more than Hardy. 
C)  Laurel enjoys science fiction movies more than Hardy. 
D)  The diagrams do not provide any information about relative preferences. 
A)  They have identical movie preferences. 
B)  Laurel enjoys romantic comedies more than Hardy. 
C)  Laurel enjoys science fiction movies more than Hardy. 
D)  The diagrams do not provide any information about relative preferences.

Question 12

-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

Accepted Answer

A)  A to B. 
B)  B to C. 
C)  D to B 
D)  D to C. 
A)  A to B. 
B)  B to C. 
C)  D to B 
D)  D to C.

Question 13

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

Accepted Answer

A)  ended up being the highest prices ever charged by the company. 
B)  were always lower than the sale prices under the previous policy. 
C)  were not actually charged every day, but only once a month during half-off sales. 
D)  ended up being higher than the sale prices under the previous pricing policy. 
A)  ended up being the highest prices ever charged by the company. 
B)  were always lower than the sale prices under the previous policy. 
C)  were not actually charged every day, but only once a month during half-off sales. 
D)  ended up being higher than the sale prices under the previous pricing policy.

Question 14

Which of the following refers to the increase in the usefulness of a product as the number of consumers who use it increases?

Accepted Answer

A)  positive externalities 
B)  network externalities 
C)  external marginal utility 
D)  the impact of celebrity endorsements 
A)  positive externalities 
B)  network externalities 
C)  external marginal utility 
D)  the impact of celebrity endorsements

Question 15

Explain the endowment effect.

Accepted Answer

The endowment effect refers to the tende

Question 16

After getting an A on your economics exam, you decide to go to your favourite Mexican restaurant to celebrate. You are having trouble deciding whether to order the chipotle chicken chimichanga or the cilantro seafood enchiladas. Use the rule of equal marginal utility per dollar to determine which one to purchase: (a) the chimichanga for $8 which gives you 120 units of utility, or (b) the enchiladas for $15 which gives you 195 units of utility?

Accepted Answer

You should buy the chimichanga

Question 17

List three reasons why demand for a product will often increase if the product is endorsed by a celebrity.

Accepted Answer

1. Consumers may believe that the celebr

Question 18

Which of the following statements about utility and preferences is false?

Accepted Answer

A)  If Sidra prefers tea to coffee and coffee to hot chocolate, then she must prefer tea to hot chocolate. 
B)  Preferences can be ranked. 
C)  If two individuals, Ingrid and Inez, each consume the same bundle of goods, then both Inez and Ingrid must receive the same utility from the bundle. 
D)  Utility cannot be compared across consumers. 
A)  If Sidra prefers tea to coffee and coffee to hot chocolate, then she must prefer tea to hot chocolate. 
B)  Preferences can be ranked. 
C)  If two individuals, Ingrid and Inez, each consume the same bundle of goods, then both Inez and Ingrid must receive the same utility from the bundle. 
D)  Utility cannot be compared across consumers.

Question 19

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 20

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

Accepted Answer

A)  The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third bottle of Coca-Cola. 
B)  The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third pretzel. 
C)  The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her friend Margie's third pretzel. 
D)  The total utility of one bottle of Coca-Cola is greater than the total utility of two bottles of Coca-Cola. 
A)  The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third bottle of Coca-Cola. 
B)  The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third pretzel. 
C)  The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her friend Margie's third pretzel. 
D)  The total utility of one bottle of Coca-Cola is greater than the total utility of two bottles of Coca-Cola.

Marginal utility is

-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?

Economists assume people's tastes are identical.

If preferences are transitive, indifference curves

The amount of income a consumer has to spend on goods and services is known as

One possible reason as to why consumers respond to sales is that by displaying a 'high' regular price and a 'low' sale price, sales provide consumers with a reference point to interpret the prices being offered.

In their surveys of consumers, Daniel Kahneman, Jack Knetsch and Richard Thaler found that

If a consumer always buys goods rationally, then

What is an indifference curve? Why can indifference curves never cross?

-Refer to Figure 6-3. The Bobsey twins, 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?

-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

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

Which of the following refers to the increase in the usefulness of a product as the number of consumers who use it increases?

Explain the endowment effect.

List three reasons why demand for a product will often increase if the product is endorsed by a celebrity.

Which of the following statements about utility and preferences is false?

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

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

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

Marginal utility is

-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?

Economists assume people's tastes are identical.

If preferences are transitive, indifference curves

The amount of income a consumer has to spend on goods and services is known as

One possible reason as to why consumers respond to sales is that by displaying a 'high' regular price and a 'low' sale price, sales provide consumers with a reference point to interpret the prices being offered.

In their surveys of consumers, Daniel Kahneman, Jack Knetsch and Richard Thaler found that

If a consumer always buys goods rationally, then

What is an indifference curve? Why can indifference curves never cross?

-Refer to Figure 6-3. The Bobsey twins, 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?

-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

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

Which of the following refers to the increase in the usefulness of a product as the number of consumers who use it increases?

Explain the endowment effect.

List three reasons why demand for a product will often increase if the product is endorsed by a celebrity.

Which of the following statements about utility and preferences is false?

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

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

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