Question 1

The demand curve for a Giffen good is

Accepted Answer

A)  non-linear but downward-sloping. 
B)  vertical. 
C)  upward-sloping. 
D)  non-existent. 
A)  non-linear but downward-sloping. 
B)  vertical. 
C)  upward-sloping. 
D)  non-existent.

Question 2

Behavioral economics helps explain why customers ________ at J.C.Penney.

Accepted Answer

A)  favored the policy of everyday low prices and not sales and coupons 
B)  favored sales and coupons and not the policy of everyday low prices 
C)  were equally happy with sales and coupons and the policy of everyday low prices 
D)  responded negatively to both sales and coupons and the policy of everyday low prices 
A)  favored the policy of everyday low prices and not sales and coupons 
B)  favored sales and coupons and not the policy of everyday low prices 
C)  were equally happy with sales and coupons and the policy of everyday low prices 
D)  responded negatively to both sales and coupons and the policy of everyday low prices

Question 3

Which of the following refers to the increase in the usefulness of a product as the number of consumers who use it increases?

Accepted Answer

A)  positive externalities 
B)  network externalities 
C)  external marginal utility 
D)  the impact of celebrity endorsements 
A)  positive externalities 
B)  network externalities 
C)  external marginal utility 
D)  the impact of celebrity endorsements

Question 4

The substitution effect of an increase in the price of peaches is

Accepted Answer

A)  the change in the quantity demanded that results from a change in the price of peaches making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. 
B)  the change in the demand for nectarines (a substitute good) that results when peaches become more expensive relative to nectarines, holding constant the effect of the price change on consumer purchasing power. 
C)  the change in the quantity demanded of peaches that results from the effect of the change in the price of peaches on the consumer's purchasing power. 
D)  the change in the demand for peaches that results when the price of peaches increases. 
A)  the change in the quantity demanded that results from a change in the price of peaches making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. 
B)  the change in the demand for nectarines (a substitute good) that results when peaches become more expensive relative to nectarines, holding constant the effect of the price change on consumer purchasing power. 
C)  the change in the quantity demanded of peaches that results from the effect of the change in the price of peaches on the consumer's purchasing power. 
D)  the change in the demand for peaches that results when the price of peaches increases.

Question 5

Consider the following hypothetical scenarios: Scenario A: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.The sales attendant at the store tells you that the pair of jeans you wish to buy is on sale for $160 at another store,located about a 20-minute drive away.
Scenario B: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.The sales attendant at the store tells you that the t-shirt you wish to buy is on sale for $30 at another store,located about a 20-minute drive away.
Based on standard economic theory,under which scenario would you make the 20-minute trip to the other store?

Accepted Answer

A)  Scenario A because the pair of jeans is a very expensive item and $15 saving is quite substantial 
B)  Scenario B because a $15 saving amounts to a substantial discount (about 33 percent) 
C)  in either scenario if I think a $15 savings is worth the 20-minute trip 
D)  in none of these scenarios if I think the $15 saving is not worth the 20-minute trip 
E)  C and D are correct answers. 
A)  Scenario A because the pair of jeans is a very expensive item and $15 saving is quite substantial 
B)  Scenario B because a $15 saving amounts to a substantial discount (about 33 percent) 
C)  in either scenario if I think a $15 savings is worth the 20-minute trip 
D)  in none of these scenarios if I think the $15 saving is not worth the 20-minute trip 
E)  C and D are correct answers.

Question 6

In a survey of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to

Accepted Answer

A)  go out of business because a larger hardware store opened in the same city; 82 percent of those surveyed believed it was unfair for the larger store to compete with the smaller store. 
B)  raise the price of snow shovels the day following a snowstorm; 82 percent of those surveyed believed this was unfair. 
C)  sell tickets to sporting and cultural events at prices higher than prices paid at the ticket windows for the same events; 82 percent of those surveyed believed this was unfair. 
D)  remain in business even though the store was not making an economic profit; 82 percent of those surveyed believed it would be unfair for the store to go out of business if there no other hardware stores in the same area. 
A)  go out of business because a larger hardware store opened in the same city; 82 percent of those surveyed believed it was unfair for the larger store to compete with the smaller store. 
B)  raise the price of snow shovels the day following a snowstorm; 82 percent of those surveyed believed this was unfair. 
C)  sell tickets to sporting and cultural events at prices higher than prices paid at the ticket windows for the same events; 82 percent of those surveyed believed this was unfair. 
D)  remain in business even though the store was not making an economic profit; 82 percent of those surveyed believed it would be unfair for the store to go out of business if there no other hardware stores in the same area.

Question 7

Along a downward-sloping linear demand curve

Accepted Answer

A)  the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase. 
B)  the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities remain constant. 
C)  the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases. 
D)  the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remain constant. 
A)  the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase. 
B)  the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities remain constant. 
C)  the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases. 
D)  the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remain constant.

Question 8

We can derive the market demand curve for gold earrings

Accepted Answer

A)  only if the tastes of all gold earring consumers are similar. 
B)  by adding horizontally the individual demand curves of each gold earring consumer. 
C)  by adding vertically the quantity demanded of each gold earring consumed at each price. 
D)  by adding the prices each gold earring consumer is willing to pay for each quantity. 
A)  only if the tastes of all gold earring consumers are similar. 
B)  by adding horizontally the individual demand curves of each gold earring consumer. 
C)  by adding vertically the quantity demanded of each gold earring consumed at each price. 
D)  by adding the prices each gold earring consumer is willing to pay for each quantity.

Question 9

During a study session for an economics exam with three other students,Peter Daltry commented on an example of a consumer who had to decide the on number of slices of pizza and cups of Coca-Cola he would consume.Peter explained that "To maximize his utility this consumer must equate the marginal utility per dollar for pizza and Coca-Cola." Was Peter's analysis correct?

Accepted Answer

A)  Peter described one of the conditions necessary for utility maximization. The consumer also must equate the marginal utility of pizza and the marginal utility of cups of Coca-Cola. 
B)  Peter's statement is correct. 
C)  Peter's statement is correct but we must also assume that the consumer is rational. 
D)  Peter describes one of the conditions necessary for utility maximization. The second condition is that total spending on both goods must equal the amount available to be spent. 
A)  Peter described one of the conditions necessary for utility maximization. The consumer also must equate the marginal utility of pizza and the marginal utility of cups of Coca-Cola. 
B)  Peter's statement is correct. 
C)  Peter's statement is correct but we must also assume that the consumer is rational. 
D)  Peter describes one of the conditions necessary for utility maximization. The second condition is that total spending on both goods must equal the amount available to be spent.

Question 10

The absolute value of the slope of the budget constraint is equal to

Accepted Answer

A)  the marginal rate of substitution between the two goods in question. 
B)  the price of good on the vertical axis divided by the price of the good on the horizontal axis. 
C)  the price of good on the horizontal axis divided by the price of the good on the vertical axis. 
D)  quantity of the good on the vertical axis divided by the quantity of the good on the horizontal axis. 
A)  the marginal rate of substitution between the two goods in question. 
B)  the price of good on the vertical axis divided by the price of the good on the horizontal axis. 
C)  the price of good on the horizontal axis divided by the price of the good on the vertical axis. 
D)  quantity of the good on the vertical axis divided by the quantity of the good on the horizontal axis.

Question 11

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

Accepted Answer

A)  behavioral economics. 
B)  irrational economics. 
C)  social economics. 
D)  new wave economics. 
A)  behavioral economics. 
B)  irrational economics. 
C)  social economics. 
D)  new wave economics.

Question 12

What is the marginal rate of substitution?

Accepted Answer

A)  the price ratio 
B)  the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market 
C)  the rate at which the consumer is willing to trade one good for another so that she increases her utility 
D)  the rate at which the consumer is willing to trade one good for another without any loss in utility 
A)  the price ratio 
B)  the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market 
C)  the rate at which the consumer is willing to trade one good for another so that she increases her utility 
D)  the rate at which the consumer is willing to trade one good for another without any loss in utility

Question 13

Figure 10-9  
-Refer to Figure 10-9.If the consumer has $240 to spend on DVDs and CDs,what is the price of a CD if the budget constraint is BC2?

Accepted Answer

A)  $8 
B)  $10 
C)  $20 
D)  $40 
A)  $8 
B)  $10 
C)  $20 
D)  $40

Question 14

The substitution effect of an increase in the price of Raisin Bran refers to

Accepted Answer

A)  the decrease in the demand for Raisin Bran when its price rises. 
B)  the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left. 
C)  the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant. 
D)  the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, cause consumers to buy less Raisin Bran. 
A)  the decrease in the demand for Raisin Bran when its price rises. 
B)  the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left. 
C)  the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant. 
D)  the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, cause consumers to buy less Raisin Bran.

Question 15

Assume that Anne has $300 to spend on DVDs and CDs.Her optimal consumption of DVDs and CDs is illustrated by a tangency between a budget line and an indifference curve.Now assume that the price of CDs rises but the price of DVDs falls.How can you show that Anne is made better off by these price changes?

Accepted Answer

A)  Show that the price changes shift Anne's budget line outward; the budget line is tangent to a higher indifference curve. 
B)  Show that the price changes move Anne along her budget line to a higher indifference curve. 
C)  Show that Anne can afford to buy the optimal combination of DVDs and CDs at their original prices; then show that Anne can now reach a higher indifference curve. 
D)  Show that Anne can now afford to buy more DVDs, which give her greater utility than CDs. 
A)  Show that the price changes shift Anne's budget line outward; the budget line is tangent to a higher indifference curve. 
B)  Show that the price changes move Anne along her budget line to a higher indifference curve. 
C)  Show that Anne can afford to buy the optimal combination of DVDs and CDs at their original prices; then show that Anne can now reach a higher indifference curve. 
D)  Show that Anne can now afford to buy more DVDs, which give her greater utility than CDs.

Question 16

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

Accepted Answer

A)  the indifference curve that intersects the horizontal axis. 
B)  the indifference curve that intersects the vertical axis. 
C)  an indifference curve that is tangent to the budget constraint. 
D)  the budget constraint where it intersects one of the axes. 
A)  the indifference curve that intersects the horizontal axis. 
B)  the indifference curve that intersects the vertical axis. 
C)  an indifference curve that is tangent to the budget constraint. 
D)  the budget constraint where it intersects one of the axes.

Question 17

If Joey Kobayashi experiences diminishing marginal utility from eating hot dogs then

Accepted Answer

A)  his total utility from eating hot dogs is negative. 
B)  the marginal utility from the next hot dog Joey eats will be negative. 
C)  the additional satisfaction he receives from eating another hot dog will be less then the satisfaction he received from his eating his last hot dog. 
D)  Joey is maximizing the marginal utility per dollar he receives from eating hot dogs. 
A)  his total utility from eating hot dogs is negative. 
B)  the marginal utility from the next hot dog Joey eats will be negative. 
C)  the additional satisfaction he receives from eating another hot dog will be less then the satisfaction he received from his eating his last hot dog. 
D)  Joey is maximizing the marginal utility per dollar he receives from eating hot dogs.

Question 18

For a demand curve to be upward sloping,the good would have to be an inferior good,and

Accepted Answer

A)  the income effect would have to be larger than the substitution effect. 
B)  the income effect would have to be smaller than the substitution effect. 
C)  the income effect would have to be equal to the substitution effect. 
D)  the income effect and the substitution effect would have to be nonexistent. 
A)  the income effect would have to be larger than the substitution effect. 
B)  the income effect would have to be smaller than the substitution effect. 
C)  the income effect would have to be equal to the substitution effect. 
D)  the income effect and the substitution effect would have to be nonexistent.

Question 19

If,when you consume another piece of candy,your marginal utility is zero,then

Accepted Answer

A)  you want more candy. 
B)  you have maximized your total utility from consuming candy. 
C)  you have not yet reached the point of diminishing marginal utility. 
D)  you should consume less candy. 
A)  you want more candy. 
B)  you have maximized your total utility from consuming candy. 
C)  you have not yet reached the point of diminishing marginal utility. 
D)  you should consume less candy.

Question 20

Grant has $200 to spend each month on restaurant meals and jazz performances at his
neighborhood jazz club.The price of a typical restaurant meal is $20 and the price of a jazz performance ticket is $10.Grant is maximizing his utility by consuming 6 restaurant meals and attending 8 jazz performances.Suppose Grant still has $200 to spend,but the price of restaurant meal rises to $25,while the price of jazz performance ticket drops to $8.Is Grant better off or worse off than he was before the price change? Use a budget constraint/indifference curve graph to illustrate your answer.

Accepted Answer

Initially,when the price of a typical re

The demand curve for a Giffen good is

Behavioral economics helps explain why customers ________ at J.C.Penney.

Which of the following refers to the increase in the usefulness of a product as the number of consumers who use it increases?

The substitution effect of an increase in the price of peaches is

In a survey of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to

Along a downward-sloping linear demand curve

We can derive the market demand curve for gold earrings

The absolute value of the slope of the budget constraint is equal to

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

What is the marginal rate of substitution?

Figure 10-9 -Refer to Figure 10-9.If the consumer has $240 to spend on DVDs and CDs,what is the price of a CD if the budget constraint is BC₂?

The substitution effect of an increase in the price of Raisin Bran refers to

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

If Joey Kobayashi experiences diminishing marginal utility from eating hot dogs then

For a demand curve to be upward sloping,the good would have to be an inferior good,and

If,when you consume another piece of candy,your marginal utility is zero,then

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

The demand curve for a Giffen good is

Behavioral economics helps explain why customers ________ at J.C.Penney.

Which of the following refers to the increase in the usefulness of a product as the number of consumers who use it increases?

The substitution effect of an increase in the price of peaches is

In a survey of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to

Along a downward-sloping linear demand curve

We can derive the market demand curve for gold earrings

The absolute value of the slope of the budget constraint is equal to

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

What is the marginal rate of substitution?

Figure 10-9 -Refer to Figure 10-9.If the consumer has $240 to spend on DVDs and CDs,what is the price of a CD if the budget constraint is BC2?

The substitution effect of an increase in the price of Raisin Bran refers to

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

If Joey Kobayashi experiences diminishing marginal utility from eating hot dogs then

For a demand curve to be upward sloping,the good would have to be an inferior good,and

If,when you consume another piece of candy,your marginal utility is zero,then

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.If the consumer has $240 to spend on DVDs and CDs,what is the price of a CD if the budget constraint is BC₂?