Question 1

The word "util" has been used by economists in the past as an objective measure of utility. Today economists believe that

Accepted Answer

A)  utility cannot be measured objectively. 
B)  utility can be measured objectively because people can use prices of different goods to measure utility. 
C)  all of the important conclusions of the economic model of consumer behavior depend on utility being measured objectively. 
D)  the util truly is an objective, rather than a subjective, measure of utility. 
A)  utility cannot be measured objectively. 
B)  utility can be measured objectively because people can use prices of different goods to measure utility. 
C)  all of the important conclusions of the economic model of consumer behavior depend on utility being measured objectively. 
D)  the util truly is an objective, rather than a subjective, measure of utility.

Question 2

What is a Giffen good?

Accepted Answer

A Giffen good is something con

Question 3

Suppose your marginal utility from consuming the 3rd slice of cake is zero, then your total utility from consuming cake is

Accepted Answer

A)  maximized. 
B)  decreasing. 
C)  negative. 
D)  increasing. 
A)  maximized. 
B)  decreasing. 
C)  negative. 
D)  increasing.

Question 4

The highest-valued alternative that must be given up to engage in an activity is the definition of

Accepted Answer

A)  utility. 
B)  implicit cost. 
C)  opportunity cost. 
D)  economic sacrifice. 
A)  utility. 
B)  implicit cost. 
C)  opportunity cost. 
D)  economic sacrifice.

Question 5

The Wong family consumes 3 pounds of fish and 5 pounds of chicken per month. The price of fish is $8 per pound and chicken is $4 per pound.
a. What is the amount of income allocated to fish and chicken consumption?
b. What is the price ratio (the price of fish relative to the price of chicken)?
c. Explain the meaning of the price ratio you computed.
d. If the Wongs maximize utility, what is the ratio of the marginal utility of fish to the marginal utility of chicken?
e. If the price of chicken rises, will the Wong family consume more chicken, less chicken or the same amount of chicken? Explain your answer using the rule of equal marginal utility per dollar.

Accepted Answer

a. Income = $44
b. Price of fish / price

Question 6

Which of the following is a common mistake made by consumers?

Accepted Answer

A)  taking into account the implicit costs of an activity 
B)  ignoring sunk costs 
C)  being overly optimistic about their future behavior 
D)  being overly pessimistic about their future behavior 
A)  taking into account the implicit costs of an activity 
B)  ignoring sunk costs 
C)  being overly optimistic about their future behavior 
D)  being overly pessimistic about their future behavior

Question 7

Identify the one statement that does not demonstrate how social effects influence consumer choice.

Accepted Answer

A)  Students in an Economics class are required to purchase a textbook assigned by the professor. 
B)  There is utility gained from consuming goods or services that others are consuming. 
C)  Some products that people consume are determined by the social popularity of the products. 
D)  Companies such as Zappos.com and Netflix invite their consumers to write reviews about their experience with their products which are then posted on the internet for others to see. 
A)  Students in an Economics class are required to purchase a textbook assigned by the professor. 
B)  There is utility gained from consuming goods or services that others are consuming. 
C)  Some products that people consume are determined by the social popularity of the products. 
D)  Companies such as Zappos.com and Netflix invite their consumers to write reviews about their experience with their products which are then posted on the internet for others to see.

Question 8

Vinny consumes tacos and chicken wings. To keep his utility constant, he must consume more tacos if he consumes fewer chicken wings. This means that

Accepted Answer

A)  Vinny's indifference curve for tacos and chicken wings must have a negative slope. 
B)  the prices Vinny pays for tacos and chicken wings are always the same. 
C)  Vinny's marginal utility from each good must be constant along his convex indifference curves for tacos and chicken wings. 
D)  Vinny's marginal rate of substitution must be constant along his indifference curves for tacos and chicken wings. 
A)  Vinny's indifference curve for tacos and chicken wings must have a negative slope. 
B)  the prices Vinny pays for tacos and chicken wings are always the same. 
C)  Vinny's marginal utility from each good must be constant along his convex indifference curves for tacos and chicken wings. 
D)  Vinny's marginal rate of substitution must be constant along his indifference curves for tacos and chicken wings.

Question 9

Lilly Davis has $5 per week to spend on any combination of ice cream and candy. The price of an ice cream cone is $2 and the price of a candy bar is $1. The table below shows Lilly'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 Lilly purchases 2 ice cream cones and 1 candy bar. Is she consuming the optimal consumption bundle? If so, explain why. If not, what combination should she buy and why?

Accepted Answer

a.
 @#IMG-DLM& b. If Lilly purchases 2 ice cream c

Question 10

Figure 10-9  
-Refer to Figure 10-9. The change in the budget constraint from BC1 to BC2 implies

Accepted Answer

A)  the prices of DVDs and CDs have increased. 
B)  income and the prices of DVDs and CDs have increased. 
C)  the price of DVDs has increased and the price of CDs has decreased. 
D)  the price of DVDs has decreased and the price of CDs has increased. 
A)  the prices of DVDs and CDs have increased. 
B)  income and the prices of DVDs and CDs have increased. 
C)  the price of DVDs has increased and the price of CDs has decreased. 
D)  the price of DVDs has decreased and the price of CDs has increased.

Question 11

Which of the following statements is false?

Accepted Answer

A)  There is an indifference curve associated with any combination of goods selected by a consumer. 
B)  A consumer is indifferent among all consumption bundles along a given budget line. 
C)  All consumption bundles along a given indifference curve are equally desirable. 
D)  Consumption bundles that lie on higher indifference curves yield higher utility. 
A)  There is an indifference curve associated with any combination of goods selected by a consumer. 
B)  A consumer is indifferent among all consumption bundles along a given budget line. 
C)  All consumption bundles along a given indifference curve are equally desirable. 
D)  Consumption bundles that lie on higher indifference curves yield higher utility.

Question 12

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

Accepted Answer

An indifference curve shows the combinat

Question 13

Consumers maximize total utility within their budget constraint by

Accepted Answer

A)  buying the cheapest goods they can find. 
B)  buying whatever they like the best. 
C)  buying the goods with the largest marginal utility per dollar spent. 
D)  spending the same dollar amount for each good. 
A)  buying the cheapest goods they can find. 
B)  buying whatever they like the best. 
C)  buying the goods with the largest marginal utility per dollar spent. 
D)  spending the same dollar amount for each good.

Question 14

The demand curve for an inferior good can never be downward sloping.

Accepted Answer

A) True 
 B)False

Question 15

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. What is Keira's marginal utility per dollar spent on the third cup of soup?

Accepted Answer

A)  72 units of utility 
B)  36 units of utility 
C)  12 units of utility 
D)  6 units of utility 
A)  72 units of utility 
B)  36 units of utility 
C)  12 units of utility 
D)  6 units of utility

Question 16

One possible reason as to why consumers respond to sales is that by displaying a "high" regular price and a "low" sale price, sales provide consumers with a reference point to interpret the prices being offered.

Accepted Answer

A) True 
 B)False

Question 17

Explain the endowment effect.

Accepted Answer

The endowment effect refers to the tende

Question 18

What must be true in terms of the income effect, the substitution effect, and the type of good for the good's demand curve to be upward sloping?

Accepted Answer

The income effect would have t

Question 19

A consumer's budget constraint is

Accepted Answer

A)  the limited income that a consumer has to spend on goods and services. 
B)  the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market. 
C)  the price ratio a consumer faces in the marketplace. 
D)  the extent to which one's preferences are limited by one's income. 
A)  the limited income that a consumer has to spend on goods and services. 
B)  the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market. 
C)  the price ratio a consumer faces in the marketplace. 
D)  the extent to which one's preferences are limited by one's income.

Question 20

Figure 10-2   Figure 10-2 represents the demand for ice cream cones.
-Goods with upward sloping demand curves are referred to as

Accepted Answer

A)  Marshall goods. 
B)  Giffen goods. 
C)  substitute goods. 
D)  luxury goods. 
A)  Marshall goods. 
B)  Giffen goods. 
C)  substitute goods. 
D)  luxury goods.

Exam 10: Consumer Choice and Behavioral Economics

The word "util" has been used by economists in the past as an objective measure of utility. Today economists believe that

What is a Giffen good?

Suppose your marginal utility from consuming the 3rd slice of cake is zero, then your total utility from consuming cake is

The highest-valued alternative that must be given up to engage in an activity is the definition of

Which of the following is a common mistake made by consumers?

Identify the one statement that does not demonstrate how social effects influence consumer choice.

Vinny consumes tacos and chicken wings. To keep his utility constant, he must consume more tacos if he consumes fewer chicken wings. This means that

Figure 10-9 -Refer to Figure 10-9. The change in the budget constraint from BC1 to BC2 implies

Which of the following statements is false?

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

Consumers maximize total utility within their budget constraint by

The demand curve for an inferior good can never be downward sloping.

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. What is Keira's marginal utility per dollar spent on the third cup of soup?

One possible reason as to why consumers respond to sales is that by displaying a "high" regular price and a "low" sale price, sales provide consumers with a reference point to interpret the prices being offered.

Explain the endowment effect.

What must be true in terms of the income effect, the substitution effect, and the type of good for the good's demand curve to be upward sloping?

A consumer's budget constraint is

Figure 10-2 Figure 10-2 represents the demand for ice cream cones. -Goods with upward sloping demand curves are referred to as

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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