Exam 10: Consumer Choice and Behavioral Economics

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

Which of the following is not a reason why companies such as Under Armour and Movado pay Tom Brady to endorse their products?

You participate in a taste test for a new protein supplement called "Boost." You are given five consecutive one ounce vials of the supplement and after consuming each vial you are asked to note your reaction.You consume the first vial and your response is: "Hmmm,quite good!" After the second,you say,"Not bad at all." After the third,you note,"It's alright." and after the fourth you wince,"No more,the after-taste is getting to me.I need water." What economic principle does this scenario illustrate? Define the principle.

For a demand curve to be upward sloping,the good would have to be an inferior good,and

An advantage of Microsoft windows is its compatibility with the widest range of hardware and software.The dominance of Windows is self-reinforcing: hardware and software manufacturers ensure that their products are compatible with Windows in order to have access to the large number of Windows users.Which principle best describes this scenario?

Figure 10-5 -Refer to Figure 10-5.Consider the budget constraint BC1.If the price of DVDs is $20 and the price of CDs is $10,what is the consumer's income?

A curve that shows combinations of consumption bundles that give a consumer the same utility is called

A consumer's budget constraint is

Suppose Barry is maximizing his utility from consuming used paperback novels and audio books.The price of a used novel = $4 and the price of an audio book = $8.If the marginal utility of the last novel was 32 units of utility (utils)what was the marginal utility of the last audio book purchased?

Studies on consumer behavior have found that most people value fairness enough that they will refuse to participate in transactions they consider unfair,even if they are worse off as a result.How does this affect a firm's decision to raise prices in the event of a temporary increase in demand?

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,the marginal utility of each taco Harry consumes increases and

The satisfaction a person receives from consuming goods and services is called

What is the endowment effect?

We can derive the market demand curve for gold earrings

Figure 10-2 -Refer to Figure 10-2.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?

In an experiment that employed the dictator game,economists at Cornell University gave student "allocators" the option of dividing $20 in only two ways (a)$18 for themselves and $2 to another student,or (b)$10 for themselves and $10 to another student.What was one result from this experiment?

Figure 10-5 -Refer to Figure 10-5.If the consumer has $240 to spend on DVDs and CDs,what is the price of a DVD if the budget constraint is BC1?

The economic model of consumer behavior predicts that

Assume that Anne has $300 to spend on DVDs and CDs.Her optimal consumption of DVDs and CDs is illustrated by a tangency between a budget line and an indifference curve.Now assume that the price of CDs rises but the price of DVDs falls.How can you show that Anne is made better off by these price changes?