Exam 10: Consumer Choice and Behavioral Economics

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?

Total utility is maximized in the consumption of two goods by

Adhira buys chocolates and almonds. She has 3 bars of chocolates and 4 bags of almonds. The marginal utility of the third chocolate bar is 18 units of utility and the marginal utility from the fourth bag of almonds is also 18. Is Adhira maximizing her utility?

Describe the demand curve for a Giffen good.

A construction project in Congressman Foghorn's district is unfinished. Foghorn has asked that a new appropriations bill include funds to complete the project, despite a report by an independent agency that the project is a waste of taxpayer money. Foghorn's project is a bridge that crosses a river between two cities in his district. The press has criticized Foghorn and dubbed the project "a bridge too far" since another bridge, located closer to the same two cities Foghorn's bridge will connect, already exists and can accommodate all traffic between the two cities. Foghorn argues that if the bridge project is not completed, the $50 million already spent will have been wasted. Is Foghorn's argument economically rational? Explain your answer.

If your total satisfaction increases when you consume another unit, your marginal utility must be

Behavioral economics refers to the study of situations

Figure 10-9 -Refer to Figure 10-9. 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?

Suppose the marginal utilities for the first three cans of soda are 100, 80 and 60, respectively. The total utility received from consuming 2 cans is

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

The economic model of consumer behavior predicts that

The quantity demanded of tickets to the Super Bowl is always greater than the than the quantity supplied. Which of the following in the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?

Which of the following is not a common mistake made by consumers?

Consider the following hypothetical scenarios: Scenario A: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45. The sales attendant at the store tells you that the pair of jeans you wish to buy is on sale for $160 at another store, located about a 20-minute drive away. Scenario B: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45. The sales attendant at the store tells you that the t-shirt you wish to buy is on sale for $30 at another store, located about a 20-minute drive away. Based on standard economic theory, under which scenario would you make the 20-minute trip to the other store?

Figure 10-7 Manuri has $300 to spend on Pilates classes and Yoga classes. The price of a group Pilates class is $20 and the price of a group Yoga class is $10. Manuri's optimal bundle is given by "A" in Figure 10-7. -Refer to Figure 10-7. Suppose the price of Pilates sessions rise to $30 while income and the price of Yoga sessions remain unchanged. The substitution effect of this price change is represented by the movement from

The income effect of a decrease in the price of macaroni and cheese (assume this is an inferior good) results in

Some economists have suggested that network externalities result in consumers being locked into the use of products with inferior technologies. Economists Stan Leibowitz and Stephen Margolis have studied cases that have been cited as examples of this and found

Table 10-7 Table 10-7 shows Antonio's utility from beer and pizza. -Refer to Table 10-7. 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?

The income effect results in consumers increasing the quantity of normal goods demanded when the price falls.

Which of the following does not explain why consumers buy products that many other consumers are already buying?