Question 1

Explain the concept of network externalities.

Accepted Answer

A network externality is a sit

Question 2

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is equal.

Accepted Answer

A) True 
 B)False

Question 3

Behavioral economics refers to the study of situations

Accepted Answer

A) where consumers and firms appear to make choices that are appropriate to reach their goals. 
B) where consumers and firms appear to value fairness when they make choices. 
C) where consumers and firms disobey the laws of demand and supply. 
D) where consumers and firms do not appear to be making choices that are economically rational. 
A) where consumers and firms appear to make choices that are appropriate to reach their goals. 
B) where consumers and firms appear to value fairness when they make choices. 
C) where consumers and firms disobey the laws of demand and supply. 
D) where consumers and firms do not appear to be making choices that are economically rational.

Question 4

Lilly Davis has $5 per week to spend on any combination of ice cream and candy.The price of an ice cream cone is $2 and the price of a candy bar is $1.The table below shows Lilly's utility values.Use the table to answer the questions that follow the table.
   a.Complete the table by filling in the blank spaces.
b.Suppose Lilly purchases 2 ice cream cones and 1 candy bar.Is she consuming the optimal consumption bundle? If so,explain why.If not,what combination should she buy and why?

Accepted Answer

a. @#IMG-DLM& b.If Lilly purchases 2 ice cream con

Question 5

Economists usually assume that people act in a rational,self-interested way.In explaining how consumers make choices this means that economists believe

Accepted Answer

A) consumers will always buy goods and services at the lowest possible prices. 
B) consumers spend their incomes to order to accumulate the most goods and services. 
C) consumers make choices that will leave them as satisfied as possible given their incomes,tastes and the prices of goods and services available to them. 
D) consumers will spend their incomes and time on activities that benefit themselves as much as possible,without regard to the welfare of others. 
A) consumers will always buy goods and services at the lowest possible prices. 
B) consumers spend their incomes to order to accumulate the most goods and services. 
C) consumers make choices that will leave them as satisfied as possible given their incomes,tastes and the prices of goods and services available to them. 
D) consumers will spend their incomes and time on activities that benefit themselves as much as possible,without regard to the welfare of others.

Question 6

A budget constraint

Accepted Answer

A) represents the bundles of consumption that make a consumer equally happy. 
B) refers to the limited amount of income available to consumers to spend on good and services. 
C) reflects the desire by consumers to increase their income. 
D) shows the prices that a consumer chooses to pay for products he consumes. 
A) represents the bundles of consumption that make a consumer equally happy. 
B) refers to the limited amount of income available to consumers to spend on good and services. 
C) reflects the desire by consumers to increase their income. 
D) shows the prices that a consumer chooses to pay for products he consumes.

Question 7

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed,Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

Accepted Answer

A) income effect only or substitution effect only but not both effects 
B) income and substitution effects 
C) price effect 
D) consumption effect 
A) income effect only or substitution effect only but not both effects 
B) income and substitution effects 
C) price effect 
D) consumption effect

Question 8

Table 10-3
  
-Refer to Table 10-3.For steak and cheese and grilled chicken sandwiches,the table contains the values of the marginal utility (MU)and marginal utility per dollar (MU/P)for Mabel Jarvis.Mabel has $14 to spend on steak and cheese and grilled chicken sandwiches.Which of the following statements is true?

Accepted Answer

A) If Mabel maximizes her utility she will buy three steak and cheese sandwiches and two grilled chicken sandwiches. 
B) If Mabel was maximizing her utility when spending $14 and then received an additional $4,she would receive the most marginal utility per dollar if her next purchase was another grilled chicken sandwich. 
C) Mabel will first buy two steak and cheese sandwiches; then with her remaining $6 she will buy three grilled chicken sandwiches. 
D) To maximize her utility,Mabel will need a total of $36,the income needed to buy 6 steak and cheese sandwiches and 6 grilled chicken sandwiches. 
A) If Mabel maximizes her utility she will buy three steak and cheese sandwiches and two grilled chicken sandwiches. 
B) If Mabel was maximizing her utility when spending $14 and then received an additional $4,she would receive the most marginal utility per dollar if her next purchase was another grilled chicken sandwich. 
C) Mabel will first buy two steak and cheese sandwiches; then with her remaining $6 she will buy three grilled chicken sandwiches. 
D) To maximize her utility,Mabel will need a total of $36,the income needed to buy 6 steak and cheese sandwiches and 6 grilled chicken sandwiches.

Question 9

Which of the following is not a characteristic of indifference curves?

Accepted Answer

A) Indifference curves cannot intersect. 
B) Indifference curves are usually bowed in,or convex. 
C) The slope of an indifference curve is negative. 
D) The closer to the origin,the greater the utility level. 
A) Indifference curves cannot intersect. 
B) Indifference curves are usually bowed in,or convex. 
C) The slope of an indifference curve is negative. 
D) The closer to the origin,the greater the utility level.

Question 10

During a study session for an economics exam with three other students,Peter Daltry commented on an example of a consumer who had to decide the on number of slices of pizza and cups of Coca-Cola he would consume.Peter explained that "To maximize his utility this consumer must equate the marginal utility per dollar for pizza and Coca-Cola." Was Peter's analysis correct?

Accepted Answer

A) Peter described one of the conditions necessary for utility maximization.The consumer also must equate the marginal utility of pizza and the marginal utility of cups of Coca-Cola. 
B) Peter's statement is correct. 
C) Peter's statement is correct but we must also assume that the consumer is rational. 
D) Peter describes one of the conditions necessary for utility maximization.The second condition is that total spending on both goods must equal the amount available to be spent. 
A) Peter described one of the conditions necessary for utility maximization.The consumer also must equate the marginal utility of pizza and the marginal utility of cups of Coca-Cola. 
B) Peter's statement is correct. 
C) Peter's statement is correct but we must also assume that the consumer is rational. 
D) Peter describes one of the conditions necessary for utility maximization.The second condition is that total spending on both goods must equal the amount available to be spent.

Question 11

A sunk cost is

Accepted Answer

A) another term that means opportunity cost. 
B) a term used to describe the cost of capital that the owners of a firm sink into their business. 
C) the highest valued alternative that must be given up to engage in an activity. 
D) a cost that has already been paid and cannot be recovered. 
A) another term that means opportunity cost. 
B) a term used to describe the cost of capital that the owners of a firm sink into their business. 
C) the highest valued alternative that must be given up to engage in an activity. 
D) a cost that has already been paid and cannot be recovered.

Question 12

Table 10-6
   Table 10-6 shows Antonio's utility from beer and pizza.
-Refer to Table 10-6.Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice.How many of each good will he consume when he maximizes his utility?

Accepted Answer

A) 2 glasses of beer,1 slice of pizza 
B) 2 glasses of beer,3 slices of pizza 
C) 3 glasses of beer,2 slices of pizza 
D) 4 glasses of beer,5 slices of pizza 
A) 2 glasses of beer,1 slice of pizza 
B) 2 glasses of beer,3 slices of pizza 
C) 3 glasses of beer,2 slices of pizza 
D) 4 glasses of beer,5 slices of pizza

Question 13

Total utility is constant along a given indifference curve.

Accepted Answer

A) True 
 B)False

Question 14

A change in the price of a good has two effects on the quantity consumed.What are these effects?

Accepted Answer

A) the income effect and the substitution effect 
B) the utility effect and the budget effect 
C) the total utility effect and marginal utility effect 
D) the consumption effect and expenditure effect 
A) the income effect and the substitution effect 
B) the utility effect and the budget effect 
C) the total utility effect and marginal utility effect 
D) the consumption effect and expenditure effect

Question 15

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 16

Goods with upward sloping demand curves are referred to as

Accepted Answer

A) Marshall goods. 
B) Giffen goods. 
C) substitute goods. 
D) luxury goods. 
A) Marshall goods. 
B) Giffen goods. 
C) substitute goods. 
D) luxury goods.

Question 17

An increase in income results in an outward shift of an indifference curve.

Accepted Answer

A) True 
 B)False

Question 18

Table 10-4
  
-Refer to Table 10-4,which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub)sandwiches and tacos.Assume that the price of the sub sandwiches is $4 and the price of tacos is $2.When Harry's income is $14 he buys two Italian sub sandwiches and three tacos.The last column lists the values of the marginal utility per dollar for tacos when the price of tacos 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 tacos so he can buy one more sub.This is an example of the substitution effect of a price change. 
B) Harry's purchasing power has increased.If tacos are a normal good for Harry he will buy fewer tacos.This is an example of the income effect of a price change. 
C) Harry's purchasing power has increased.If tacos are a normal good for Harry he will buy more tacos.This is an example of the income effect of a price change. 
D) Harry's purchasing power has increased.Harry buys fewer tacos.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 tacos so he can buy one more sub.This is an example of the substitution effect of a price change. 
B) Harry's purchasing power has increased.If tacos are a normal good for Harry he will buy fewer tacos.This is an example of the income effect of a price change. 
C) Harry's purchasing power has increased.If tacos are a normal good for Harry he will buy more tacos.This is an example of the income effect of a price change. 
D) Harry's purchasing power has increased.Harry buys fewer tacos.This is an example of the substitution effect of a price change

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Suppose Renee can increase her total utility from consuming video rentals and books by buying one more book and renting one fewer video.Which of the following is true?

Accepted Answer

A) The marginal utility of video rentals is negative. 
B) The marginal utility per dollar spent on books exceeds that of video rentals. 
C) The marginal utility of the last book consumed exceeds the marginal utility of the last video rental consumed. 
D) The marginal utility of the last video rental consumed exceeds the marginal utility of the last book consumed. 
A) The marginal utility of video rentals is negative. 
B) The marginal utility per dollar spent on books exceeds that of video rentals. 
C) The marginal utility of the last book consumed exceeds the marginal utility of the last video rental consumed. 
D) The marginal utility of the last video rental consumed exceeds the marginal utility of the last book consumed.

Explain the concept of network externalities.

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is equal.

Behavioral economics refers to the study of situations

Economists usually assume that people act in a rational,self-interested way.In explaining how consumers make choices this means that economists believe

A budget constraint

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed,Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

Which of the following is not a characteristic of indifference curves?

A sunk cost is

Table 10-6 Table 10-6 shows Antonio's utility from beer and pizza. -Refer to Table 10-6.Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice.How many of each good will he consume when he maximizes his utility?

Total utility is constant along a given indifference curve.

A change in the price of a good has two effects on the quantity consumed.What are these effects?

Goods with upward sloping demand curves are referred to as

An increase in income results in an outward shift of an indifference curve.

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

Suppose Renee can increase her total utility from consuming video rentals and books by buying one more book and renting one fewer video.Which of the following is true?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

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Exam 10: Consumer Choice and Behavioral Economics

Explain the concept of network externalities.

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is equal.

Behavioral economics refers to the study of situations

Economists usually assume that people act in a rational,self-interested way.In explaining how consumers make choices this means that economists believe

A budget constraint

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed,Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

Which of the following is not a characteristic of indifference curves?

A sunk cost is

Table 10-6 Table 10-6 shows Antonio's utility from beer and pizza. -Refer to Table 10-6.Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice.How many of each good will he consume when he maximizes his utility?

Total utility is constant along a given indifference curve.

A change in the price of a good has two effects on the quantity consumed.What are these effects?

Goods with upward sloping demand curves are referred to as

An increase in income results in an outward shift of an indifference curve.

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

Suppose Renee can increase her total utility from consuming video rentals and books by buying one more book and renting one fewer video.Which of the following is true?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters