Question 1

A common mistake made by consumers is the failure to take into account the monetary costs of their actions.

Accepted Answer

A) True 
 B)False

Question 2

The economic model of consumer behavior predicts that

Accepted Answer

A)  consumers will try to earn as much income as they can over their lifetimes. 
B)  consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy. 
C)  consumers will try to accumulate as many goods and services as they can before they die. 
D)  consumers divide their time between consumption and leisure activities in order to maximize social welfare. 
A)  consumers will try to earn as much income as they can over their lifetimes. 
B)  consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy. 
C)  consumers will try to accumulate as many goods and services as they can before they die. 
D)  consumers divide their time between consumption and leisure activities in order to maximize social welfare.

Question 3

The substitution effect of a decrease in the price of movie tickets results in

Accepted Answer

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

Question 4

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

Accepted Answer

A)  technology 
B)  the satisfaction people derive by being viewed as "fashionable" 
C)  cost-effective way to gather information about a product 
D)  differences in tastes and preferences 
A)  technology 
B)  the satisfaction people derive by being viewed as "fashionable" 
C)  cost-effective way to gather information about a product 
D)  differences in tastes and preferences

Question 5

A Giffen good could be either a normal good or an inferior good.

Accepted Answer

A) True 
 B)False

Question 6

The average price of gasoline in your neighborhood is $3.53 per gallon.Your neighbor,Diana tells you that you can "save a lot" by frequenting a gas station 20 miles outside your neighborhood where the price of gasoline is $3.46 per gallon However,she cautions you that there usually long lines at that station.Is her suggestion beneficial to you?

Accepted Answer

A)  Yes, since gasoline is a necessity for car owners, the total cost savings would be relatively substantial. 
B)  No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station. 
C)  Yes, the lower price of gasoline at the rival station increases my purchasing power and enables me to consume more of other goods. 
D)  No, my friend is misled; clearly, the lower priced gasoline must be of inferior quality and could damage vehicles. 
A)  Yes, since gasoline is a necessity for car owners, the total cost savings would be relatively substantial. 
B)  No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station. 
C)  Yes, the lower price of gasoline at the rival station increases my purchasing power and enables me to consume more of other goods. 
D)  No, my friend is misled; clearly, the lower priced gasoline must be of inferior quality and could damage vehicles.

Question 7

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

Question 8

If Callum is consuming his utility maximizing bundle and the price of one good rises,what happens to the marginal utility per dollar spent on this good (MU/P),and what should Callum do?

Accepted Answer

A)  MU/P has increased and Callum should buy more of this good. 
B)  MU/P has increased and Callum should buy less of this good. 
C)  MU/P has decreased and Callum should buy more of this good. 
D)  MU/P has decreased and Callum should buy less of this good. 
A)  MU/P has increased and Callum should buy more of this good. 
B)  MU/P has increased and Callum should buy less of this good. 
C)  MU/P has decreased and Callum should buy more of this good. 
D)  MU/P has decreased and Callum should buy less of this good.

Question 9

In order to derive an individual's demand curve for salmon,we would observe what happens to the utility-maximizing bundle when we change

Accepted Answer

A)  income and hold everything else constant. 
B)  tastes and preferences and hold everything else constant. 
C)  the price of the product and hold everything else constant. 
D)  the price of a close substitute and hold everything else constant. 
A)  income and hold everything else constant. 
B)  tastes and preferences and hold everything else constant. 
C)  the price of the product and hold everything else constant. 
D)  the price of a close substitute and hold everything else constant.

Question 10

What is an indifference curve?

Accepted Answer

A)  It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods. 
B)  It is a curve that shows the combinations of consumption bundles that gives the consumer the same utility. 
C)  It is a curve that shows ranks a consumer's preference for various consumption bundles. 
D)  It is a curve that shows the tradeoff a consumer faces among different combinations of consumption bundles. 
A)  It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods. 
B)  It is a curve that shows the combinations of consumption bundles that gives the consumer the same utility. 
C)  It is a curve that shows ranks a consumer's preference for various consumption bundles. 
D)  It is a curve that shows the tradeoff a consumer faces among different combinations of consumption bundles.

Question 11

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

Accepted Answer

A) True 
 B)False

Question 12

The demand for a Giffen good slopes upward.

Accepted Answer

A) True 
 B)False

Question 13

Table 10-3
  
-Refer to Table 10-3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda.The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1.Use this information to select the correct statement.

Accepted Answer

A)  We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his income is. 
B)  To maximize his utility Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda. 
C)  We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee's utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity. 
D)  If Lee has an unlimited budget he will maximize his utility by buying only Lime Fizz Soda. 
A)  We cannot determine how many ice cream cones and cans of Lime Fizz Soda Lee will consume without knowing what his income is. 
B)  To maximize his utility Lee should consume 1 ice cream cone and 5 cans of Lime Fizz Soda. 
C)  We cannot determine how many ice cream cones and cans of Lime Fizz Soda will maximize Lee's utility because we are given only the marginal utility per dollar values. We also need to know the marginal utility for each quantity. 
D)  If Lee has an unlimited budget he will maximize his utility by buying only Lime Fizz Soda.

Question 14

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 15

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

Accepted Answer

A) True 
 B)False

Question 16

Table 10-3
  
-Refer to Table 10-3.The table above shows Lee's marginal utility from consuming ice cream cones and cans of Lime Fizz Soda.Select the phrase that completes the following statement."We can determine the number of ice cream cones and cans of Lime Fizz Soda Lee should consume to maximize his utility

Accepted Answer

A)  if we know what Lee's income is." 
B)  if we know what Lee's income is and the price of an ice cream cone and the price of a can Lime Fizz Soda." 
C)  by adding up the marginal utilities for ice cream cones and Lime Fizz Soda." 
D)  if we know the values of the marginal utility per dollar for ice cream cones and Lime Fizz Soda." 
A)  if we know what Lee's income is." 
B)  if we know what Lee's income is and the price of an ice cream cone and the price of a can Lime Fizz Soda." 
C)  by adding up the marginal utilities for ice cream cones and Lime Fizz Soda." 
D)  if we know the values of the marginal utility per dollar for ice cream cones and Lime Fizz Soda."

Question 17

Economists assume that the goal of consumers is to

Accepted Answer

A)  do as little work as possible to survive. 
B)  make themselves as well off as possible. 
C)  expend all their income. 
D)  consume as much as possible. 
A)  do as little work as possible to survive. 
B)  make themselves as well off as possible. 
C)  expend all their income. 
D)  consume as much as possible.

Question 18

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is equal.

Accepted Answer

A) True 
 B)False

Question 19

What is behavioral economics?

Accepted Answer

A)  the study of how people make wealth-maximizing decisions 
B)  the study of how people behave in the face of scarcity 
C)  the study of situations in which people act in ways that are not economically rational 
D)  the study of how people make decisions at the margin 
A)  the study of how people make wealth-maximizing decisions 
B)  the study of how people behave in the face of scarcity 
C)  the study of situations in which people act in ways that are not economically rational 
D)  the study of how people make decisions at the margin

Question 20

Figure 10-6  
-Refer to Figure 10-6.Which diagram demonstrates a decrease in total utility following an increase in the price of candy?

Accepted Answer

A)  the movement from e to d in Panel A 
B)  the movement from g to f in Panel B 
C)  the movement from k to h in Panel C 
D)  none of the above 
A)  the movement from e to d in Panel A 
B)  the movement from g to f in Panel B 
C)  the movement from k to h in Panel C 
D)  none of the above

A common mistake made by consumers is the failure to take into account the monetary costs of their actions.

The economic model of consumer behavior predicts that

The substitution effect of a decrease in the price of movie tickets results in

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

A Giffen good could be either a normal good or an inferior good.

What is the endowment effect?

If Callum is consuming his utility maximizing bundle and the price of one good rises,what happens to the marginal utility per dollar spent on this good (MU/P),and what should Callum do?

In order to derive an individual's demand curve for salmon,we would observe what happens to the utility-maximizing bundle when we change

What is an indifference curve?

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

The demand for a Giffen good slopes upward.

Table 10-3 -Refer to Table 10-3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda.The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1.Use this information to select the correct statement.

A good is path dependent when

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

Economists assume that the goal of consumers is to

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is equal.

What is behavioral economics?

Figure 10-6 -Refer to Figure 10-6.Which diagram demonstrates a decrease in total utility following an increase in the price of candy?

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

A common mistake made by consumers is the failure to take into account the monetary costs of their actions.

The economic model of consumer behavior predicts that

The substitution effect of a decrease in the price of movie tickets results in

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

A Giffen good could be either a normal good or an inferior good.

What is the endowment effect?

If Callum is consuming his utility maximizing bundle and the price of one good rises,what happens to the marginal utility per dollar spent on this good (MU/P),and what should Callum do?

In order to derive an individual's demand curve for salmon,we would observe what happens to the utility-maximizing bundle when we change

What is an indifference curve?

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

The demand for a Giffen good slopes upward.

Table 10-3 -Refer to Table 10-3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda.The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1.Use this information to select the correct statement.

A good is path dependent when

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

Economists assume that the goal of consumers is to

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is equal.

What is behavioral economics?

Figure 10-6 -Refer to Figure 10-6.Which diagram demonstrates a decrease in total utility following an increase in the price of candy?

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