Question 1

In a survey of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to

Accepted Answer

A) go out of business because a larger hardware store opened in the same city; 82 percent of those surveyed believed it was unfair for the larger store to compete with the smaller store. 
B) raise the price of snow shovels the day following a snowstorm; 82 percent of those surveyed believed this was unfair. 
C) sell tickets to sporting and cultural events at prices higher than prices paid at the ticket windows for the same events; 82 percent of those surveyed believed this was unfair. 
D) remain in business even though the store was not making an economic profit; 82 percent of those surveyed believed it would be unfair for the store to go out of business if there no other hardware stores in the same area. 
A) go out of business because a larger hardware store opened in the same city; 82 percent of those surveyed believed it was unfair for the larger store to compete with the smaller store. 
B) raise the price of snow shovels the day following a snowstorm; 82 percent of those surveyed believed this was unfair. 
C) sell tickets to sporting and cultural events at prices higher than prices paid at the ticket windows for the same events; 82 percent of those surveyed believed this was unfair. 
D) remain in business even though the store was not making an economic profit; 82 percent of those surveyed believed it would be unfair for the store to go out of business if there no other hardware stores in the same area.

Question 2

Table 10-2
  
-Refer to Table 10-2.The table above shows Lee's marginal utility from consuming ice cream cones and cans of Lime Fizz Soda.Select the phrase that completes the following statement."We can determine the number of ice cream cones and cans of Lime Fizz Soda Lee should consume to maximize his utility

Accepted Answer

A) if we know what Lee's income is." 
B) if we know what Lee's income is and the price of an ice cream cone and the price of a can Lime Fizz Soda." 
C) by adding up the marginal utilities for ice cream cones and Lime Fizz Soda." 
D) if we know the values of the marginal utility per dollar for ice cream cones and Lime Fizz Soda." 
A) if we know what Lee's income is." 
B) if we know what Lee's income is and the price of an ice cream cone and the price of a can Lime Fizz Soda." 
C) by adding up the marginal utilities for ice cream cones and Lime Fizz Soda." 
D) if we know the values of the marginal utility per dollar for ice cream cones and Lime Fizz Soda."

Question 3

Celebrity endorsements of products,such as Snoop Dogg's tweets about the Toyota Sienna minivan,are intended to cause the demand curve for the product to ________,which allows the product's manufacturer to ________.

Accepted Answer

A) shift to the right; lower its production costs and increase output. 
B) shift to the left; lower its production costs and increase output. 
C) shift to the right; sell more of the product at every price. 
D) shift to the left; sell more of the product at every price. 
A) shift to the right; lower its production costs and increase output. 
B) shift to the left; lower its production costs and increase output. 
C) shift to the right; sell more of the product at every price. 
D) shift to the left; sell more of the product at every price.

Question 4

Why do convex indifference curve have a negative slope?

Accepted Answer

A) because consumers take market prices as given 
B) because consumers face a budget constraint 
C) because to keep utility constant,a consumer must get more of one good if she is to give up some of the other 
D) because scarcity implies that it is not possible to consume more of one good without giving up some of the other 
A) because consumers take market prices as given 
B) because consumers face a budget constraint 
C) because to keep utility constant,a consumer must get more of one good if she is to give up some of the other 
D) because scarcity implies that it is not possible to consume more of one good without giving up some of the other

Question 5

In the utility maximizing model,consumer preferences are assumed to be transitive.What does this mean?

Accepted Answer

A) that consumers prefer more of a good to less 
B) that consumers have the freedom to change their preferences from time to time 
C) that consumers have preferences that are relatively consistent in the time period under consideration 
D) that consumers go through cycles in their consumption behavior 
A) that consumers prefer more of a good to less 
B) that consumers have the freedom to change their preferences from time to time 
C) that consumers have preferences that are relatively consistent in the time period under consideration 
D) that consumers go through cycles in their consumption behavior

Question 6

Figure 10-4  
-Refer to Figure 10-4.If the price of biscotti is $1.50 and the price of a cappuccino is $3.00,what is the slope of the budget constraint?

Accepted Answer

A) -2 
B) -(3.00 - 1.50)/(3.00 + 1.50)= -1/3 
C) -1/2 
D) The slope cannot be determined without the value of income. 
A) -2 
B) -(3.00 - 1.50)/(3.00 + 1.50)= -1/3 
C) -1/2 
D) The slope cannot be determined without the value of income.

Question 7

In explaining consumer behavior economists explain how consumer tastes and preferences are formed.

Accepted Answer

A) True 
 B)False

Question 8

There are two conditions necessary for a consumer to maximize her utility.One is that the marginal utilities per dollar spent on each good and service consumed are equal.What is the other condition?

Accepted Answer

A) Total spending on all goods and services must equal the amount available to be spent. 
B) The consumer must be satisfied with the choices she makes. 
C) The total spent on each good and service is the same. 
D) The prices of each good and service consumed must not be too high. 
A) Total spending on all goods and services must equal the amount available to be spent. 
B) The consumer must be satisfied with the choices she makes. 
C) The total spent on each good and service is the same. 
D) The prices of each good and service consumed must not be too high.

Question 9

Wilbur Rickhiser,a financial advisor,recently told one of his clients: "The biggest mistake you can make is to hold onto a stock for too long in order to avoid a loss.Let's say you bought a stock for $50 per share but that six months later the price fell to $40 after a poor earnings report.Many of my clients in this situation will hold the stock,hoping the price will later rise above $50.In most cases like this the price does not rise and may even fall.You must know when to cut your losses." Which of the following is the best explanation for Rickhiser's advice?

Accepted Answer

A) People sometimes buy stocks because other people are buying them or they want to appear to be fashionable. 
B) People sometimes make mistakes when they buy stocks because of the endowment effect. 
C) People sometimes make mistakes when they buy stocks or when they buy goods and services: they ignore the monetary opportunity costs of their choices. 
D) People often fail to ignore the sunk costs of their decisions.The cost of the stock bought at $50 per share is a sunk cost. 
A) People sometimes buy stocks because other people are buying them or they want to appear to be fashionable. 
B) People sometimes make mistakes when they buy stocks because of the endowment effect. 
C) People sometimes make mistakes when they buy stocks or when they buy goods and services: they ignore the monetary opportunity costs of their choices. 
D) People often fail to ignore the sunk costs of their decisions.The cost of the stock bought at $50 per share is a sunk cost.

Question 10

Suppose Adam Einberg pays $100 for a ticket to a new Broadway play and $100 was the maximum price he was willing to pay.On the day of the performance of the play Adam refuses to sell the ticket for $150.How would behavioral economists explain Adam's refusal to sell his ticket?

Accepted Answer

A) Adam's tastes had changed from the time he bought the ticket to the time of the performance of the play. 
B) When Adam bought the ticket he was being unrealistic about his future behavior. 
C) The endowment effect explains Adam's actions.People like Adam seem to value things that they have more than the things they do not have. 
D) Adam's income probably increased between the time he bought the ticket and the day of the play's performance. 
A) Adam's tastes had changed from the time he bought the ticket to the time of the performance of the play. 
B) When Adam bought the ticket he was being unrealistic about his future behavior. 
C) The endowment effect explains Adam's actions.People like Adam seem to value things that they have more than the things they do not have. 
D) Adam's income probably increased between the time he bought the ticket and the day of the play's performance.

Question 11

Table 10-5
   Table 10-5 lists Jay's marginal utilities for burgers and Pepsi.Jay has $7 to spend on these two goods.The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 10-5.If Jay can eat all the burgers he wants for free,how many burgers will he consume?

Accepted Answer

A) 7 burgers 
B) 6 burgers 
C) 5 burgers 
D) 3 burgers 
A) 7 burgers 
B) 6 burgers 
C) 5 burgers 
D) 3 burgers

Question 12

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,the $200,000 he spent on his education

Accepted Answer

A) should be ignored since it represents a sunk cost. 
B) should be considered since it is money he has spent and needs to recoup. 
C) should be ignored only if Kim can earn more than $200,000 by running his website. 
D) should be considered since it is money he could have used to invest in his website. 
A) should be ignored since it represents a sunk cost. 
B) should be considered since it is money he has spent and needs to recoup. 
C) should be ignored only if Kim can earn more than $200,000 by running his website. 
D) should be considered since it is money he could have used to invest in his website.

Question 13

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card,even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?

Accepted Answer

The processing companies are taking adva

Question 14

Describe the demand curve for a Giffen good.

Accepted Answer

The demand curve for a Giffen

Question 15

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

Accepted Answer

The two effects are the substitution and

Question 16

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

Accepted Answer

The good must be an

Question 17

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 realize 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 realize their actions are inconsistent with their goals. 
C) consumer tastes change constantly. 
D) they do not always value fairness when they make choices.

Question 18

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

Accepted Answer

An indifference curve shows the combinat

Question 19

Figure 10-1   Figure 10-1 represents the demand for ice cream cones.
-Refer to Figure 10-1.Which of the following statements is true?

Accepted Answer

A) Points a and b are the utility-maximizing quantities of ice-cream cones at two different prices of ice-cream. 
B) Points a and b may not necessarily be the utility-maximizing quantities of ice-cream cones at two different prices because we have no information on the consumer's budget or the price of other goods. 
C) Point a could be a utility-maximizing choice if the price is $3 but point b may not be because we have no information on the marginal utility per dollar when price changes. 
D) Points a and b are derived independently of the utility-maximizing model. 
A) Points a and b are the utility-maximizing quantities of ice-cream cones at two different prices of ice-cream. 
B) Points a and b may not necessarily be the utility-maximizing quantities of ice-cream cones at two different prices because we have no information on the consumer's budget or the price of other goods. 
C) Point a could be a utility-maximizing choice if the price is $3 but point b may not be because we have no information on the marginal utility per dollar when price changes. 
D) Points a and b are derived independently of the utility-maximizing model.

Question 20

Economists Gary Becker and Kevin Murphy are associated with which of the following?

Accepted Answer

A) the discovery of the first example of a Giffen good 
B) They have argued that social factors are not important in explaining the choices consumers make. 
C) Consumers appear to receive utility from consuming goods they believe are popular. 
D) They discovered that price changes have both income and substitution effects. 
A) the discovery of the first example of a Giffen good 
B) They have argued that social factors are not important in explaining the choices consumers make. 
C) Consumers appear to receive utility from consuming goods they believe are popular. 
D) They discovered that price changes have both income and substitution effects.

In a survey of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to

Celebrity endorsements of products,such as Snoop Dogg's tweets about the Toyota Sienna minivan,are intended to cause the demand curve for the product to ,which allows the product's manufacturer to .

Why do convex indifference curve have a negative slope?

In the utility maximizing model,consumer preferences are assumed to be transitive.What does this mean?

Figure 10-4 -Refer to Figure 10-4.If the price of biscotti is $1.50 and the price of a cappuccino is $3.00,what is the slope of the budget constraint?

In explaining consumer behavior economists explain how consumer tastes and preferences are formed.

There are two conditions necessary for a consumer to maximize her utility.One is that the marginal utilities per dollar spent on each good and service consumed are equal.What is the other condition?

Suppose Adam Einberg pays $100 for a ticket to a new Broadway play and $100 was the maximum price he was willing to pay.On the day of the performance of the play Adam refuses to sell the ticket for $150.How would behavioral economists explain Adam's refusal to sell his ticket?

Table 10-5 Table 10-5 lists Jay's marginal utilities for burgers and Pepsi.Jay has $7 to spend on these two goods.The price of a burger is $2 and the price of a can of Pepsi is $1. -Refer to Table 10-5.If Jay can eat all the burgers he wants for free,how many burgers will he consume?

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card,even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?

Describe the demand curve for a Giffen good.

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

One reason that consumers and businesses might not act rationally is

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

Figure 10-1 Figure 10-1 represents the demand for ice cream cones. -Refer to Figure 10-1.Which of the following statements is true?

Economists Gary Becker and Kevin Murphy are associated with which of the following?

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

Exam 10: Consumer Choice and Behavioral Economics

In a survey of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to

Celebrity endorsements of products,such as Snoop Dogg's tweets about the Toyota Sienna minivan,are intended to cause the demand curve for the product to ________,which allows the product's manufacturer to ________.

Why do convex indifference curve have a negative slope?

In the utility maximizing model,consumer preferences are assumed to be transitive.What does this mean?

Figure 10-4 -Refer to Figure 10-4.If the price of biscotti is $1.50 and the price of a cappuccino is $3.00,what is the slope of the budget constraint?

In explaining consumer behavior economists explain how consumer tastes and preferences are formed.

There are two conditions necessary for a consumer to maximize her utility.One is that the marginal utilities per dollar spent on each good and service consumed are equal.What is the other condition?

Suppose Adam Einberg pays $100 for a ticket to a new Broadway play and $100 was the maximum price he was willing to pay.On the day of the performance of the play Adam refuses to sell the ticket for $150.How would behavioral economists explain Adam's refusal to sell his ticket?

Table 10-5 Table 10-5 lists Jay's marginal utilities for burgers and Pepsi.Jay has $7 to spend on these two goods.The price of a burger is $2 and the price of a can of Pepsi is $1. -Refer to Table 10-5.If Jay can eat all the burgers he wants for free,how many burgers will he consume?

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card,even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?

Describe the demand curve for a Giffen good.

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

One reason that consumers and businesses might not act rationally is

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

Figure 10-1 Figure 10-1 represents the demand for ice cream cones. -Refer to Figure 10-1.Which of the following statements is true?

Economists Gary Becker and Kevin Murphy are associated with which of the following?

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

Celebrity endorsements of products,such as Snoop Dogg's tweets about the Toyota Sienna minivan,are intended to cause the demand curve for the product to ,which allows the product's manufacturer to .