Question 1

Economists have used the ultimatum game and the dictator game in experiments designed to determine

Accepted Answer

A)  whether consumers care about fairness when they make decisions. 
B)  whether consumers believe it is fair for producers to raise the price of a product for which there is excess demand. 
C)  whether consumers understand the difference between implicit costs and explicit costs. 
D)  whether consumers understand the rule of equal marginal utility per dollar spent. 
A)  whether consumers care about fairness when they make decisions. 
B)  whether consumers believe it is fair for producers to raise the price of a product for which there is excess demand. 
C)  whether consumers understand the difference between implicit costs and explicit costs. 
D)  whether consumers understand the rule of equal marginal utility per dollar spent.

Question 2

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 3

Farah has $100 to spend each month on bread and chicken.Suppose the price of bread is $4 a loaf and the price of chicken is $5 per pound.
a. Draw her budget constraint and label it BC0.Put bread on the horizontal axis and chicken on the vertical axis.Be sure to identify the intercept values.
b. Suppose Farah is a utility maximizer and she consumes 10 loaves of bread and 12 pounds of chicken.On the same graph you drew in part (a),draw an indifference curve to identify her optimal bundle.Label this bundle "E."
c. Is her budget exhausted? Verify your answer.
d. Now suppose Farah's income falls to so that she can now devote $80 to the two goods.Prices however remain unchanged.In the same diagram,graph her new budget constraint and label it BC1.Be sure to identify any new intercept values.
e. Following the change in income,can Farah consume the same bundle "E"? Explain your answer.
f. What must happen to her total utility following the decrease in her income?

Accepted Answer

a. See the figure below
b. See the figur

Question 4

If the price of lattes,a normal good you enjoy,falls

Accepted Answer

A)  the income and substitution effects offset each other but the price effect leads you to buy more lattes. 
B)  both the income and substitution effects lead you to buy more lattes. 
C)  the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more latte purchased. 
D)  the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more latte purchased. 
A)  the income and substitution effects offset each other but the price effect leads you to buy more lattes. 
B)  both the income and substitution effects lead you to buy more lattes. 
C)  the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more latte purchased. 
D)  the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more latte purchased.

Question 5

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

Accepted Answer

A)  the fair trade principle 
B)  the ultimatum game 
C)  the preferential treatment game 
D)  the behavioral experiment 
A)  the fair trade principle 
B)  the ultimatum game 
C)  the preferential treatment game 
D)  the behavioral experiment

Question 6

Figure 10-5  
-Refer to Figure 10-5.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 7

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 8

If by purchasing more apples and fewer oranges you increase your total utility,then apples must be cheaper than oranges.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Research by Daniel Kahneman,Jack Knetch,and Richard Thaler has shown that companies like airlines were explicitly able to include a fuel surcharge in their prices because

Accepted Answer

A)  consumers had no choice but to pay the price of the surcharges due to the lack of competition in the industry. 
B)  a government-imposed price ceiling on airline ticket prices left the airlines not other way to cover the increase in costs. 
C)  adding a separate fuel surcharge to the price of airline tickets did not actually increase the price of the tickets. 
D)  consumers see it as fair for firms to raise prices after an increase in costs. 
A)  consumers had no choice but to pay the price of the surcharges due to the lack of competition in the industry. 
B)  a government-imposed price ceiling on airline ticket prices left the airlines not other way to cover the increase in costs. 
C)  adding a separate fuel surcharge to the price of airline tickets did not actually increase the price of the tickets. 
D)  consumers see it as fair for firms to raise prices after an increase in costs.

Question 11

Eliza consumes 12 cappuccinos and 8 apple turnovers per week.The price of cappuccino is $4 each and apple turnovers are $1 each.
a.What is the amount of income allocated to cappuccino and apple turnover consumption?
b.What is the price ratio (the price of cappuccino relative to the price of apple turnovers)?
c.Explain the meaning of the price ratio you computed.
d.If Eliza maximize utility,what is the ratio of the marginal utility of cappuccino to the marginal utility of apple turnovers?
e.If the price of apple turnovers falls,will Eliza consume more apple turnovers,fewer apple turnovers or the same amount of apple turnovers? Explain your answer using the rule of equal marginal utility per dollar.

Accepted Answer

a.Income = $56
b. Price of cappuccino /

Question 12

When the price of summer tank tops falls and you buy more of them because they are relatively less expensive,this is called

Accepted Answer

A)  the substitution effect. 
B)  the income effect. 
C)  the deadweight loss effect. 
D)  the elasticity effect. 
A)  the substitution effect. 
B)  the income effect. 
C)  the deadweight loss effect. 
D)  the elasticity effect.

Question 13

As a consumer consumes more and more of a product in a particular time period,eventually marginal utility

Accepted Answer

A)  rises. 
B)  is constant. 
C)  declines. 
D)  fluctuates. 
A)  rises. 
B)  is constant. 
C)  declines. 
D)  fluctuates.

Question 14

Figure 10-8  
-Refer to Figure 10-8.Given the budget constraint in the diagram,which of the following statements is false?

Accepted Answer

A)  The consumer receives the same level of utility from consumption bundles d, e and f. 
B)  Consumption bundles b and c yield the same level of utility, which is higher than the utility represented by bundle a. 
C)  Although the consumer receives the same level of utility from bundles d and e, she cannot afford to purchase bundle d. 
D)  The consumer's optimal bundle could be bundle d, e or f. 
A)  The consumer receives the same level of utility from consumption bundles d, e and f. 
B)  Consumption bundles b and c yield the same level of utility, which is higher than the utility represented by bundle a. 
C)  Although the consumer receives the same level of utility from bundles d and e, she cannot afford to purchase bundle d. 
D)  The consumer's optimal bundle could be bundle d, e or f.

Question 15

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 16

Total utility

Accepted Answer

A)  cannot decrease as a person consumes more and more of a good. 
B)  has a constant rate of increase as a person consumes more and more of a good. 
C)  is equal to the sum of the marginal utilities of all units consumed. 
D)  is negative when marginal utility is declining. 
A)  cannot decrease as a person consumes more and more of a good. 
B)  has a constant rate of increase as a person consumes more and more of a good. 
C)  is equal to the sum of the marginal utilities of all units consumed. 
D)  is negative when marginal utility is declining.

Question 17

Figure 10-9  
-Refer to Figure 10-9.Consider the budget constraint BC1.If the price of DVDs is $20 and the price of CDs is $10,what is the consumer's income?

Accepted Answer

A)  $120 
B)  $240 
C)  $360 
D)  $480 
A)  $120 
B)  $240 
C)  $360 
D)  $480

Question 18

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 19

Some online penny auctions charge a fee,such as $1,for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

Accepted Answer

The $1 charge per bid should be consider

Question 20

Molly received an autographed poster of David Hasselhoff for her 21st birthday.Her friend Helga offered her $50 for the poster,but Molly refused to sell the poster even though she knows she would never pay that much to replace it if it was ever damaged or destroyed.Explain this inconsistency in Molly's behavior.

Accepted Answer

The inconsistency comes from Molly's fai

Economists have used the ultimatum game and the dictator game in experiments designed to determine

If preferences are transitive,indifference curves

If the price of lattes,a normal good you enjoy,falls

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

Figure 10-5 -Refer to Figure 10-5.The consumer can afford consumption bundles

Which of the following statements is false?

If by purchasing more apples and fewer oranges you increase your total utility,then apples must be cheaper than oranges.

A significant downside to network externalities is that

Research by Daniel Kahneman,Jack Knetch,and Richard Thaler has shown that companies like airlines were explicitly able to include a fuel surcharge in their prices because

When the price of summer tank tops falls and you buy more of them because they are relatively less expensive,this is called

As a consumer consumes more and more of a product in a particular time period,eventually marginal utility

Figure 10-8 -Refer to Figure 10-8.Given the budget constraint in the diagram,which of the following statements is false?

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

Total utility

Figure 10-9 -Refer to Figure 10-9.Consider the budget constraint BC₁.If the price of DVDs is $20 and the price of CDs is $10,what is the consumer's income?

Consumers maximize total utility within their budget constraint by

Some online penny auctions charge a fee,such as $1,for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

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

Economists have used the ultimatum game and the dictator game in experiments designed to determine

If preferences are transitive,indifference curves

If the price of lattes,a normal good you enjoy,falls

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

Figure 10-5 -Refer to Figure 10-5.The consumer can afford consumption bundles

Which of the following statements is false?

If by purchasing more apples and fewer oranges you increase your total utility,then apples must be cheaper than oranges.

A significant downside to network externalities is that

Research by Daniel Kahneman,Jack Knetch,and Richard Thaler has shown that companies like airlines were explicitly able to include a fuel surcharge in their prices because

When the price of summer tank tops falls and you buy more of them because they are relatively less expensive,this is called

As a consumer consumes more and more of a product in a particular time period,eventually marginal utility

Figure 10-8 -Refer to Figure 10-8.Given the budget constraint in the diagram,which of the following statements is false?

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

Total utility

Figure 10-9 -Refer to Figure 10-9.Consider the budget constraint BC1.If the price of DVDs is $20 and the price of CDs is $10,what is the consumer's income?

Consumers maximize total utility within their budget constraint by

Some online penny auctions charge a fee,such as $1,for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

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.Consider the budget constraint BC₁.If the price of DVDs is $20 and the price of CDs is $10,what is the consumer's income?