Question 1

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 2

The endowment effect suggests that that people

Accepted Answer

A)  have a strong attachment to their entitlement, regardless of whether they paid to acquire them. 
B)  have a strong sense of fairness. 
C)  are concerned about the welfare of others. 
D)  act in ways to distort market prices. 
A)  have a strong attachment to their entitlement, regardless of whether they paid to acquire them. 
B)  have a strong sense of fairness. 
C)  are concerned about the welfare of others. 
D)  act in ways to distort market prices.

Question 3

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 4

Traditionally,economists have considered culture,customs,and religion as

Accepted Answer

A)  very important influences on the choices consumers make. 
B)  relatively unimportant factors in explaining the choices consumers make. 
C)  important influences in explaining consumer choices in command economies but less important in market economies. 
D)  subject to normative economic analysis rather than positive economic analysis. 
A)  very important influences on the choices consumers make. 
B)  relatively unimportant factors in explaining the choices consumers make. 
C)  important influences in explaining consumer choices in command economies but less important in market economies. 
D)  subject to normative economic analysis rather than positive economic analysis.

Question 5

What is the endowment effect?

Accepted Answer

A)  the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than what they would be willing to pay to buy the good if they did not already own it 
B)  the tendency of people to be unwilling to sell something they already own because of its sentimental value 
C)  the tendency of people to overstate the value of a good they already own even though similar items can be purchased at a lower price 
D)  the sum total of assets that a person has acquired over the years 
A)  the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than what they would be willing to pay to buy the good if they did not already own it 
B)  the tendency of people to be unwilling to sell something they already own because of its sentimental value 
C)  the tendency of people to overstate the value of a good they already own even though similar items can be purchased at a lower price 
D)  the sum total of assets that a person has acquired over the years

Question 6

Alan Krueger conducted a survey of fans at the 2001 Super Bowl who purchased tickets to the game for $325 or $400.Krueger found that (a)94 percent of those surveyed would not have paid $3,000 for their tickets,and (b)92 percent of those surveyed would not have sold their tickets for $3,000.These results are an example of

Accepted Answer

A)  the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay if they did not already own it. 
B)  the tendency for consumers to account for monetary costs but to ignore sunk costs. 
C)  consumers placing a high value on a product because it makes them appear to be fashionable. 
D)  the law of demand. 
A)  the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay if they did not already own it. 
B)  the tendency for consumers to account for monetary costs but to ignore sunk costs. 
C)  consumers placing a high value on a product because it makes them appear to be fashionable. 
D)  the law of demand.

Question 7

After getting an A on your economics exam,you decide to go to your favorite Mexican restaurant to celebrate.You are having trouble deciding whether to order the chipotle chicken chimichanga or the cilantro seafood enchiladas.Use the rule of equal marginal utility per dollar to determine which one to purchase: (a)the chimichanga for $8 which gives you 120 units of utility,or (b)the enchiladas for $15 which gives you 195 units of utility?

Accepted Answer

You should buy the chimichanga

Question 8

In their surveys of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler found that

Accepted Answer

A)  most people considered it unfair for firms to raise their prices because of an increase in their costs, but fair to raise their prices after an increase in demand. 
B)  most people considered any increase in price to be unfair as it led to an increase in profits. 
C)  most people believed that low income people were hurt most by increases in prices. 
D)  most people considered an increase in price by firms following an increase in their costs to be fair but believed it was unfair for firms to raise their prices because of an increase in demand. 
A)  most people considered it unfair for firms to raise their prices because of an increase in their costs, but fair to raise their prices after an increase in demand. 
B)  most people considered any increase in price to be unfair as it led to an increase in profits. 
C)  most people believed that low income people were hurt most by increases in prices. 
D)  most people considered an increase in price by firms following an increase in their costs to be fair but believed it was unfair for firms to raise their prices because of an increase in demand.

Question 9

The income effect of a decrease in the price of legal services,a normal good,results in

Accepted Answer

A)  a decrease in the demand for legal services. 
B)  a decrease in the quantity demanded of legal services. 
C)  an increase in the quantity demanded of legal services. 
D)  an increase in the demand for legal services. 
A)  a decrease in the demand for legal services. 
B)  a decrease in the quantity demanded of legal services. 
C)  an increase in the quantity demanded of legal services. 
D)  an increase in the demand for legal services.

Question 10

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 11

Professor Parallax chooses two students in his economics class,Jasmine and Cassandra,to participate in the ultimatum game.He chooses Jasmine to be the allocator and Cassandra to be the recipient.He gives Jasmine $50 and as the allocator,she gets to decide how to split the money with Cassandra.If Cassandra decides to accept the amount allocated to her by Jasmine,both students get to keep the money.If Cassandra decides to reject her allocation,neither student gets to keep the money.How much will each student end up with if each student acts as if fairness is important? How much will each student end up with if only Cassandra acts as if fairness is important? How much will each student end up with if neither student cares about fairness?

Accepted Answer

If both students care about fairness,eac

Question 12

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?

Accepted Answer

A)  Raising the price would reduce the demand for tickets; there would then be a surplus and the game would not sell out. 
B)  The cost of raising the price and printing new tickets would exceed the revenue the NFL would receive from higher ticket prices. 
C)  The demand for Super Bowl tickets is elastic; raising the price would reduce total revenue. 
D)  The NFL is concerned that raising ticket prices would be considered unfair. 
A)  Raising the price would reduce the demand for tickets; there would then be a surplus and the game would not sell out. 
B)  The cost of raising the price and printing new tickets would exceed the revenue the NFL would receive from higher ticket prices. 
C)  The demand for Super Bowl tickets is elastic; raising the price would reduce total revenue. 
D)  The NFL is concerned that raising ticket prices would be considered unfair.

Question 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

Figure 10-4  
-Refer to Figure 10-4.What is the marginal rate of substitution between h and j?

Accepted Answer

A)    cookie. 
B)    cookie. 
C)  2 cookies. 
D)  4 cookies. 
A)    cookie. 
B)    cookie. 
C)  2 cookies. 
D)  4 cookies.

Question 16

Firms pay famous individuals to endorse their products because

Accepted Answer

A)  apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product. 
B)  the firms are irrational and are wasting advertising expenditures. 
C)  famous people obviously know what are the best goods and services. 
D)  famous people only consume high quality products. 
A)  apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product. 
B)  the firms are irrational and are wasting advertising expenditures. 
C)  famous people obviously know what are the best goods and services. 
D)  famous people only consume high quality products.

Question 17

Consider a downward-sloping demand curve.When the price of an inferior good increases,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 18

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 19

An item has utility for a consumer if it

Accepted Answer

A)  is scarce. 
B)  has a high price. 
C)  is something everyone else wants. 
D)  generates enjoyment or satisfaction. 
A)  is scarce. 
B)  has a high price. 
C)  is something everyone else wants. 
D)  generates enjoyment or satisfaction.

Question 20

Behavioral economists examine choices that consumers make that are not economically rational.Economists generally assume that people are rational; that is,they weigh the benefits and costs of an action and choose an action only if the benefits outweigh the costs.Why do consumers not act rationally when the result is that they make themselves worse off?

Accepted Answer

Most people who do not act rationally do

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

The endowment effect suggests that that people

Traditionally,economists have considered culture,customs,and religion as

What is the endowment effect?

In their surveys of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler found that

The income effect of a decrease in the price of legal services,a normal good,results in

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?

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

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

Figure 10-4 -Refer to Figure 10-4.What is the marginal rate of substitution between h and j?

Firms pay famous individuals to endorse their products because

Consider a downward-sloping demand curve.When the price of an inferior good increases,the income and substitution effects

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

An item has utility for a consumer if it

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

Filters

Exam 10: Consumer Choice and Behavioral Economics

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

The endowment effect suggests that that people

Traditionally,economists have considered culture,customs,and religion as

What is the endowment effect?

In their surveys of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler found that

The income effect of a decrease in the price of legal services,a normal good,results in

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?

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

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

Figure 10-4 -Refer to Figure 10-4.What is the marginal rate of substitution between h and j?

Firms pay famous individuals to endorse their products because

Consider a downward-sloping demand curve.When the price of an inferior good increases,the income and substitution effects

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

An item has utility for a consumer if it

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

Filters

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