Exam 10: Consumer Choice and Behavioral Economics

Figure 10-2 Figure 10-2 represents the demand for ice cream cones. -Refer to Figure 10-2. 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

Economists have used the ultimatum game and the dictator game in experiments designed to determine

Consumers have to make tradeoffs in deciding what to consume because

Figure 10-5 -Refer to Figure 10-5. The consumer can afford consumption bundles

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?

If Dawson prefers pizza to hamburgers and hamburgers to hot dogs, then if preferences are transitive,

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

Giffen goods

Table 10-2 Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods. -Refer to Table 10-2. Holding prices constant, when Keira's income changed from $18 to $23, her utility maximizing bundle changed. Based on your answers to her optimal choices at the two income levels, what type of goods are soup and sandwiches?

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?

For which of the following products is social influence likely to have the greatest impact?

Figure 10-9 -Refer to Figure 10-9. If the consumer has $240 to spend on DVDs and CDs, what is the price of a CD if the budget constraint is BC2?

Consider a downward-sloping demand curve. When the price of a normal good decreases, the income and substitution effects

Behavioral economics is the study of situations in which people make rational choices.

A common mistake made by consumers is the failure to take into account the sunk costs of their actions.

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions. Which of the following could explain this observation?

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

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. If Keegan can drink all the bubble tea he wants for free, how many glasses will he consume?

The marginal rate of substitution is determined by the slope of an indifference curve.

The substitution effect of a change in the price of cauliflower is the portion of the change in the quantity of cauliflower demanded that can be attributed to the change in the price of a substitute vegetable such as asparagus.