Question 1

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then Marlowe

Accepted Answer

A)  is maximizing total utility. 
B)  should buy more apples and fewer oranges. 
C)  should buy more oranges and fewer apples. 
D)  should buy fewer oranges and fewer apples. 
A)  is maximizing total utility. 
B)  should buy more apples and fewer oranges. 
C)  should buy more oranges and fewer apples. 
D)  should buy fewer oranges and fewer apples.

Question 2

Aisha and Debbie both purchase milk and bread at the same Quik Mart. They have different tastes for milk and bread and different incomes. They both buy some milk and some bread, but they buy considerably different quantities of the two goods. Which of the following statements is true, given that Aisha and Debbie are utility-maximizers?

Accepted Answer

A)  In equilibrium, their marginal rate of substitution between milk and bread is the same. 
B)  In equilibrium, their marginal rate of substitution between milk and bread is higher for the person with the higher income. 
C)  In equilibrium, the marginal rate of substitution between milk and bread is greater for the person who prefers milk more than bread. 
D)  No statement can be made about their respective marginal rates of substitution without their budget constraint/indifference curve diagrams. 
A)  In equilibrium, their marginal rate of substitution between milk and bread is the same. 
B)  In equilibrium, their marginal rate of substitution between milk and bread is higher for the person with the higher income. 
C)  In equilibrium, the marginal rate of substitution between milk and bread is greater for the person who prefers milk more than bread. 
D)  No statement can be made about their respective marginal rates of substitution without their budget constraint/indifference curve diagrams.

Question 3

Table 10-1
   Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3. Table 10-1 shows his total utility from different quantities of the two items.
-Refer to Table 10-1. What is Keegan's optimal consumption bundle?

Accepted Answer

A)  3 pita wraps and 3 bubble teas 
B)  3 pita wraps and 4 bubble teas 
C)  4 pita wraps and 2 bubble teas 
D)  5 pita wraps and 0 bubble teas 
A)  3 pita wraps and 3 bubble teas 
B)  3 pita wraps and 4 bubble teas 
C)  4 pita wraps and 2 bubble teas 
D)  5 pita wraps and 0 bubble teas

Question 4

Figure 10-1  
-Refer to Figure 10-1. Which of the following statements is true?

Accepted Answer

A)  Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B)  Quantities Q0 and Q1 may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C)  Quantity Q0 could be a utility-maximizing choice if the price is $5.75, but quantity Q1 may not be because we have no information on the marginal utility per dollar when price changes. 
D)  Quantities Q0 and Q1 are derived independently of the utility-maximizing model. 
A)  Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B)  Quantities Q0 and Q1 may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C)  Quantity Q0 could be a utility-maximizing choice if the price is $5.75, but quantity Q1 may not be because we have no information on the marginal utility per dollar when price changes. 
D)  Quantities Q0 and Q1 are derived independently of the utility-maximizing model.

Question 5

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?

Accepted Answer

A)  2 utils 
B)  12 utils 
C)  16 utils 
D)  64 utils 
A)  2 utils 
B)  12 utils 
C)  16 utils 
D)  64 utils

Question 6

Economists assume that the goal of consumers is to

Accepted Answer

A)  do as little work as possible to survive. 
B)  make themselves as well off as possible. 
C)  expend all their income. 
D)  consume as much as possible. 
A)  do as little work as possible to survive. 
B)  make themselves as well off as possible. 
C)  expend all their income. 
D)  consume as much as possible.

Question 7

The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

Accepted Answer

A)  maximizing behavior. 
B)  economizing behavior. 
C)  the price constraint. 
D)  the budget constraint. 
A)  maximizing behavior. 
B)  economizing behavior. 
C)  the price constraint. 
D)  the budget constraint.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Figure 10-1  
-Refer to Figure 10-1. When the price of hoagies increases from $5.00 to $5.75, quantity demanded decreases from Q1 to Q0. This change in quantity demanded is due to

Accepted Answer

A)  the price and output effects. 
B)  the income and substitution effects. 
C)  the fact that marginal willingness to pay falls. 
D)  the law of diminishing marginal utility. 
A)  the price and output effects. 
B)  the income and substitution effects. 
C)  the fact that marginal willingness to pay falls. 
D)  the law of diminishing marginal utility.

Question 10

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility

Accepted Answer

A)  rises. 
B)  is constant. 
C)  declines. 
D)  fluctuates. 
A)  rises. 
B)  is constant. 
C)  declines. 
D)  fluctuates.

Question 11

Table 10-5
  
-Marge buys 5 CDs and 7 DVDs. The marginal utility of the 5th CD and the marginal utility of the 7th DVD are both equal to 30 utils. Can we say that this is the optimal combination of CDs and DVDs for Marge?

Accepted Answer

A)  No. We need to know her preferences for CDs and DVDs. 
B)  Yes. 
C)  No. We need to know the prices of the CDs and DVDs. 
D)  No. If this was the optimal combination, the marginal utility per dollar of the 5th CD and the 7th DVD would be equal. 
A)  No. We need to know her preferences for CDs and DVDs. 
B)  Yes. 
C)  No. We need to know the prices of the CDs and DVDs. 
D)  No. If this was the optimal combination, the marginal utility per dollar of the 5th CD and the 7th DVD would be equal.

Question 12

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 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  The fairness challenge 
B)  The consumer choice paradigm 
C)  The ultimatum game 
D)  The Giffen paradox 
A)  The fairness challenge 
B)  The consumer choice paradigm 
C)  The ultimatum game 
D)  The Giffen paradox

Question 15

Figure 10-8  
-Refer to Figure 10-8. 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 16

Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea. The price of a pineapple is $4 and the price of a bottle of green tea is $2. The table below shows Arnie'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 Arnold purchases 4 pineapples and 2 bottles of green tea. Is he consuming the optimal consumption bundle? If so, explain why. If not, what combination should he buy and why?

Accepted Answer

a.
 @#IMG-DLM& b. If Arnold purchases 4 pineapples

Question 17

The income effect due to a price decrease will result in an increase in the quantity demanded for

Accepted Answer

A)  a Giffen good. 
B)  an inferior good. 
C)  a public good. 
D)  a normal good. 
A)  a Giffen good. 
B)  an inferior good. 
C)  a public good. 
D)  a normal good.

Question 18

Table 10-7
   Table 10-7 shows Antonio's utility from beer and pizza.
-Refer to Table 10-7. What is Antonio's marginal utility from consuming the fifth beer?

Accepted Answer

A)  4 utils 
B)  13.6 utils 
C)  69 utils 
D)  134 utils 
A)  4 utils 
B)  13.6 utils 
C)  69 utils 
D)  134 utils

Question 19

A good is path dependent when

Accepted Answer

A)  consumers get utility from consuming goods that others are consuming, such as restaurants. 
B)  the first technology that was adopted has an advantage over a better technology that came later. 
C)  people who move location follow the path of people who moved before them. 
D)  it can only be used in one way. 
A)  consumers get utility from consuming goods that others are consuming, such as restaurants. 
B)  the first technology that was adopted has an advantage over a better technology that came later. 
C)  people who move location follow the path of people who moved before them. 
D)  it can only be used in one way.

Question 20

If Callum is consuming his utility maximizing bundle and the price of one good rises, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Callum do?

Accepted Answer

A)  MU/P has increased, and Callum should buy more of this good. 
B)  MU/P has increased, and Callum should buy less of this good. 
C)  MU/P has decreased, and Callum should buy more of this good. 
D)  MU/P has decreased, and Callum should buy less of this good. 
A)  MU/P has increased, and Callum should buy more of this good. 
B)  MU/P has increased, and Callum should buy less of this good. 
C)  MU/P has decreased, and Callum should buy more of this good. 
D)  MU/P has decreased, and Callum should buy less of this good.

Exam 10: Consumer Choice and Behavioral Economics

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then Marlowe

Table 10-1 Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3. Table 10-1 shows his total utility from different quantities of the two items. -Refer to Table 10-1. What is Keegan's optimal consumption bundle?

Figure 10-1 -Refer to Figure 10-1. Which of the following statements is true?

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?

Economists assume that the goal of consumers is to

The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

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

Figure 10-1 -Refer to Figure 10-1. When the price of hoagies increases from $5.00 to $5.75, quantity demanded decreases from Q1 to Q0. This change in quantity demanded is due to

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility

Table 10-5 -Marge buys 5 CDs and 7 DVDs. The marginal utility of the 5th CD and the marginal utility of the 7th DVD are both equal to 30 utils. Can we say that this is the optimal combination of CDs and DVDs for Marge?

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

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

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

Figure 10-8 -Refer to Figure 10-8. 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?

The income effect due to a price decrease will result in an increase in the quantity demanded for

Table 10-7 Table 10-7 shows Antonio's utility from beer and pizza. -Refer to Table 10-7. What is Antonio's marginal utility from consuming the fifth beer?

A good is path dependent when

If Callum is consuming his utility maximizing bundle and the price of one good rises, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Callum do?

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

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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