Question 1

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 2

All of the following products are most likely to have significant network externalities except

Accepted Answer

A)  cat food. 
B)  cell phones. 
C)  popular board games. 
D)  fax machines. 
A)  cat food. 
B)  cell phones. 
C)  popular board games. 
D)  fax machines.

Question 3

Figure 10-3  
-Refer to Figure 10-3.What is the marginal rate of substitution between g and h?

Accepted Answer

A)    cookie. 
B)    cookie. 
C)  2 cookies. 
D)  3 cookies. 
A)    cookie. 
B)    cookie. 
C)  2 cookies. 
D)  3 cookies.

Question 4

A significant downside to network externalities is that

Accepted Answer

A)  there may be large switching costs to consumers of changing products so that consumers end up using products with inferior technologies. 
B)  firms may network with unethical suppliers or distributors. 
C)  the costs of hiring celebrity endorsements may be very high. 
D)  there may be large switching costs to firms changing technologies. 
A)  there may be large switching costs to consumers of changing products so that consumers end up using products with inferior technologies. 
B)  firms may network with unethical suppliers or distributors. 
C)  the costs of hiring celebrity endorsements may be very high. 
D)  there may be large switching costs to firms changing technologies.

Question 5

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

Accepted Answer

A)  toothpaste 
B)  restaurants 
C)  high-blood pressure medication 
D)  school textbook 
A)  toothpaste 
B)  restaurants 
C)  high-blood pressure medication 
D)  school textbook

Question 6

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

Accepted Answer

A) True 
 B)False

Question 7

The demand curve for a luxury good is upward-sloping.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

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

Question 9

Economists have used ________ and ________ in experiments designed to determine whether consumers care about fairness when they make decisions.

Accepted Answer

A)  Giffen goods; luxury goods 
B)  the income effect; the substitution effect 
C)  the ultimatum game; the dictator game 
D)  network externalities; the endowment effect 
A)  Giffen goods; luxury goods 
B)  the income effect; the substitution effect 
C)  the ultimatum game; the dictator game 
D)  network externalities; the endowment effect

Question 10

The demand curve for corn is downward sloping.If the price of corn,an inferior good,falls,

Accepted Answer

A)  the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded. 
B)  the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded. 
C)  both the income and substitution effects reinforce each other to increase the quantity demanded. 
D)  the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn. 
A)  the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded. 
B)  the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded. 
C)  both the income and substitution effects reinforce each other to increase the quantity demanded. 
D)  the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn.

Question 11

The iPod is a product without any significant network externalities.

Accepted Answer

A) True 
 B)False

Question 12

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other,similar products.These economists believe that

Accepted Answer

A)  consumers are always rational. 
B)  in practice, the gains from using a superior technology exceed the losses consumers incur from switching costs. 
C)  there is no good evidence that switching costs exist. 
D)  the government will prevent products with inferior technology from being sold to consumers. 
A)  consumers are always rational. 
B)  in practice, the gains from using a superior technology exceed the losses consumers incur from switching costs. 
C)  there is no good evidence that switching costs exist. 
D)  the government will prevent products with inferior technology from being sold to consumers.

Question 13

Figure 10-4  
-Refer to Figure 10-4.The consumer can afford consumption bundles

Accepted Answer

A)  r, s, t and u. 
B)  r, s, v and u. 
C)  s, v and u only. 
D)  s, v, t and u. 
A)  r, s, t and u. 
B)  r, s, v and u. 
C)  s, v and u only. 
D)  s, v, t and u.

Question 14

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

Accepted Answer

A)  work in the same direction to increase quantity demanded. 
B)  work in the same direction to decrease quantity demanded. 
C)  work in opposite directions and quantity demanded increases. 
D)  work in opposite directions and quantity demanded decreases. 
A)  work in the same direction to increase quantity demanded. 
B)  work in the same direction to decrease quantity demanded. 
C)  work in opposite directions and quantity demanded increases. 
D)  work in opposite directions and quantity demanded decreases.

Question 15

The slope of an indifference curve

Accepted Answer

A)  is calculated by dividing the price of good on the vertical axis by price of the good on the horizontal axis. 
B)  measures total utility. 
C)  measures the marginal rate of substitution between the two goods in question. 
D)  is calculated by dividing the quantity of the good on the vertical axis by the quantity of the good on the horizontal axis. 
A)  is calculated by dividing the price of good on the vertical axis by price of the good on the horizontal axis. 
B)  measures total utility. 
C)  measures the marginal rate of substitution between the two goods in question. 
D)  is calculated by dividing the quantity of the good on the vertical axis by the quantity of the good on the horizontal axis.

Question 16

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.Suppose Keira's income increases from $18 to $23 but prices have not changed.What is her utility maximizing bundle now?

Accepted Answer

A)  6 cups of soup and 5 sandwiches 
B)  4 cups of soup and 5 sandwiches 
C)  5 cups of soup and 4 sandwiches 
D)  5 cups of soup and 5 sandwiches 
A)  6 cups of soup and 5 sandwiches 
B)  4 cups of soup and 5 sandwiches 
C)  5 cups of soup and 4 sandwiches 
D)  5 cups of soup and 5 sandwiches

Question 17

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 18

If a consumer always buys goods rationally,then

Accepted Answer

A)  the total utilities of the different goods consumed will be equal. 
B)  the average utilities of the different goods consumed will be equal. 
C)  the marginal utility per dollar spent on all goods will be equal. 
D)  the marginal utility of the different goods consumed will be equal. 
A)  the total utilities of the different goods consumed will be equal. 
B)  the average utilities of the different goods consumed will be equal. 
C)  the marginal utility per dollar spent on all goods will be equal. 
D)  the marginal utility of the different goods consumed will be equal.

Question 19

If preferences are transitive,indifference curves

Accepted Answer

A)  intersect at the equilibrium consumption bundle. 
B)  intersect at the optimum consumption bundle. 
C)  intersect where the marginal rate of substitution for each indifference curve is equal. 
D)  do not intersect. 
A)  intersect at the equilibrium consumption bundle. 
B)  intersect at the optimum consumption bundle. 
C)  intersect where the marginal rate of substitution for each indifference curve is equal. 
D)  do not intersect.

Question 20

What is the endowment effect?

Accepted Answer

A)  the phenomenon that economic agents are endowed with different qualities and abilities so that trade among individuals increase efficiency 
B)  the tendency for economic agents with abundant resources to consume a proportionately greater quantity of goods and services 
C)  the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it. 
D)  the tendency of firms to use celebrities endowed with good looks to promote their products 
A)  the phenomenon that economic agents are endowed with different qualities and abilities so that trade among individuals increase efficiency 
B)  the tendency for economic agents with abundant resources to consume a proportionately greater quantity of goods and services 
C)  the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it. 
D)  the tendency of firms to use celebrities endowed with good looks to promote their products

Exam 10: Consumer Choice and Behavioral Economics

A good is path dependent when

All of the following products are most likely to have significant network externalities except

Figure 10-3 -Refer to Figure 10-3.What is the marginal rate of substitution between g and h?

A significant downside to network externalities is that

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

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

The demand curve for a luxury good is upward-sloping.

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

Economists have used ________ and ________ in experiments designed to determine whether consumers care about fairness when they make decisions.

The demand curve for corn is downward sloping.If the price of corn,an inferior good,falls,

The iPod is a product without any significant network externalities.

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other,similar products.These economists believe that

Figure 10-4 -Refer to Figure 10-4.The consumer can afford consumption bundles

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

The slope of an indifference curve

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

If a consumer always buys goods rationally,then

If preferences are transitive,indifference curves

What is the endowment effect?

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

Filters

Economists have used and in experiments designed to determine whether consumers care about fairness when they make decisions.