Exam 10: Consumer Choice and Behavioral Economics

Traditionally,economists have considered culture,customs,and religion as

If the marginal utility Ida Mae receives from eating chicken wings is negative then

The income effect of a decrease in the price of legal services,a normal good,results in

If by purchasing more apples and fewer oranges you increase your total utility,then apples must be cheaper than oranges.

Health Clubs typically experience an increase in one-year memberships in January,but many new customers cancel their memberships before the end of the year.Which of the following is the best explanation for this behavior?

Some economists have suggested that network externalities result in consumers being locked into the use of products with inferior technologies.Economists Stan Leibowitz and Stephen Margolis have studied cases that have been cited as examples of this and found

A sunk cost is a cost that has already been paid and cannot be recovered.

The substitution effect of a decrease in the price of movie tickets results in

Which of the following is used to explain why a consumer's willingness to buy a cell phone increases as the number of other people who own and use cell phones increases?

Tom Brady endorses Movado watches and Under Armour athletic wear.One reason Under Armour pays Tom Brady for his endorsement is that consumers believe he is more knowledgeable about athletic wear than they are.Why would the makers of Movado watches pay Tom Brady to endorse their products?

Marginal utility is

Explain the endowment effect.

Vinny consumes tacos and chicken wings.To keep his utility constant,he must consume more tacos if he consumes fewer chicken wings.This means that

What does the marginal rate of substitution measure?

Grant has $200 to spend each month on restaurant meals and jazz performances at his neighborhood jazz club.The price of a typical restaurant meal is $20 and the price of a jazz performance ticket is $10.Grant is maximizing his utility by consuming 6 restaurant meals and attending 8 jazz performances.Suppose Grant still has $200 to spend,but the price of restaurant meal rises to $25,while the price of jazz performance ticket drops to $8.Is Grant better off or worse off than he was before the price change? Use a budget constraint/indifference curve graph to illustrate your answer.

The substitution effect of an increase in the price of peaches is

If marginal utility of apples is diminishing and is a positive amount,consuming one more apple will cause

Figure 10-5 -Refer to Figure 10-5.The change in the budget constraint from BC1 to BC2 implies

________ is an experiment that tests the significance of fairness in consumer decision making.

Figure 10-1 Figure 10-1 represents the demand for ice cream cones. -Refer to Figure 10-1.When the price of ice cream cones increases from $2 to $3,quantity demanded decreases from 4 ice cream cones to 3 ice cream cones.This change in quantity demanded is due to