Exam 10: Consumer Choice and Behavioral Economics

Studies on consumer behavior have found that most people value fairness enough that they will refuse to participate in transactions they consider unfair,even if they are worse off as a result.How does this affect a firm's decision to raise prices in the event of a temporary increase in demand?

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

If a consumer receives 20 units of utility from consuming two candy bars,and 25 units of utility from consuming three candy bars,the marginal utility of the third candy bar is

Which of the following is used to explain why a consumer's willingness to buy Microsoft Office increases as the number of other people who use Microsoft Office increases?

Costs that have already been incurred,and which cannot be recovered,are known as

Explain the concept of network externalities.

You participate in a taste test for a new protein supplement called "Boost." You are given five consecutive one ounce vials of the supplement and after consuming each vial you are asked to note your reaction.You consume the first vial and your response is: "Hmmm,quite good!" After the second,you say,"Not bad at all." After the third,you note,"It's alright." and after the fourth you wince,"No more,the after-taste is getting to me.I need water." What economic principle does this scenario illustrate? Define the principle.

Article Summary The article describes three key ways startup companies can get the most benefit from celebrity endorsements. One way is choosing a celebrity that can bring credibility to the company and then incorporating the celebrity into the company's marketing strategy. Second, get public relations value from the celebrity by offering exclusive interviews, contests, and photos and videos of the celebrity with the product. Finally, make sure to choose a celebrity who will represent the product at all times, giving the product maximum exposure. Source: Kevin Tighe II, "3 Ways Startups Can Turn Celebrity Endorsements Into Big Gains," Forbes, March 8, 2013. -Refer to the Article Summary.One explanation for the increase in product sales because of celebrity endorsements is that people seem to receive ________ from goods they believe are popular.

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit,and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased,she

Aisha and Debbie both purchase milk and bread at the same Quik Mart.They have different tastes for milk and bread and different incomes.They both buy some milk and some bread,but they buy considerably different quantities of the two goods.Which of the following statements is true,given that Aisha and Debbie are utility-maximizers?

Figure 10-6 -Refer to Figure 10-6.A change in income is shown in

Marginal utility is

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

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

List three reasons why demand for a product will often increase if the product is endorsed by a celebrity.

Total utility is constant along a given indifference curve.

The income effect of a price increase for a Giffen good outweighs the substitution effect.

Figure 10-6 -Refer to Figure 10-6.A change in the price of candy only is shown in

The substitution effect of a price increase causes a decrease in the quantity demanded of an inferior good.

Under J.C.Penney's everyday low pricing policy,the everyday low prices