Question 1

Consider a downward-sloping demand curve.When the price of a normal good decreases,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 2

Behavioral economics refers to the study of situations

Accepted Answer

A)  where consumers and firms appear to make choices that are appropriate to reach their goals. 
B)  where consumers and firms appear to value fairness when they make choices. 
C)  where consumers and firms disobey the laws of demand and supply. 
D)  where consumers and firms do not appear to be making choices that are economically rational. 
A)  where consumers and firms appear to make choices that are appropriate to reach their goals. 
B)  where consumers and firms appear to value fairness when they make choices. 
C)  where consumers and firms disobey the laws of demand and supply. 
D)  where consumers and firms do not appear to be making choices that are economically rational.

Question 3

All but one of the following have been suggested by some economists as possible consequences of path dependency and switching costs.Which of the following is not a possible consequence of path dependency and switching costs?

Accepted Answer

A)  Consumers may get locked into using products with inferior technology. 
B)  market failure 
C)  diseconomies of scale 
D)  Government intervention may be necessary in affected markets in order to improve economic efficiency. 
A)  Consumers may get locked into using products with inferior technology. 
B)  market failure 
C)  diseconomies of scale 
D)  Government intervention may be necessary in affected markets in order to improve economic efficiency.

Question 4

Suppose your marginal utility from consuming the 3rd slice of cake is zero,then your total utility from consuming cake is

Accepted Answer

A)  maximized. 
B)  decreasing. 
C)  negative. 
D)  increasing. 
A)  maximized. 
B)  decreasing. 
C)  negative. 
D)  increasing.

Question 5

Music writer Anthony Kuzminski praised rock star Tom Petty in a 2007 article in the online Unrated Magazine.Kuzminski wrote: "Something Petty never can get enough credit for is his fan-friendly attitude.He kept ticket prices for [his concerts] at $50 when other acts this summer are charging upwards of $100 for stadium gigs.Petty could charge more,but he doesn't see the point.He has stated time and time again he still makes millions when he's on the road,regardless of his ticket prices.He is the last of the fan friendly rock stars out there." Use economic reasoning to write a rationale for Tom Petty's decision to charge prices for his band's ("Tom Petty and the Heartbreakers")concerts that are less than market clearing prices.
Source: Anthony Kuzminski,"Tom Petty & The Heartbreakers at the Vic Theater" http://www.unratedmagazine.com/

Accepted Answer

Tickets to Tom Petty's concerts consiste

Question 6

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.If Keira maximizes her utility,how many units of each good should she buy?

Accepted Answer

A)  1 cup of soup and 5 sandwiches 
B)  3 cups of soup and 4 sandwiches 
C)  6 cups of soup and 2 sandwiches 
D)  4 cups of soup and 3.5 sandwiches 
A)  1 cup of soup and 5 sandwiches 
B)  3 cups of soup and 4 sandwiches 
C)  6 cups of soup and 2 sandwiches 
D)  4 cups of soup and 3.5 sandwiches

Question 7

Table 10-7
   Table 10-7 shows Antonio's utility from beer and pizza.
-Refer to Table 10-7.Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice.How many of each good will he consume when he maximizes his utility?

Accepted Answer

A)  2 glasses of beer, 1 slice of pizza 
B)  2 glasses of beer, 3 slices of pizza 
C)  3 glasses of beer, 2 slices of pizza 
D)  4 glasses of beer, 5 slices of pizza 
A)  2 glasses of beer, 1 slice of pizza 
B)  2 glasses of beer, 3 slices of pizza 
C)  3 glasses of beer, 2 slices of pizza 
D)  4 glasses of beer, 5 slices of pizza

Question 8

A consumer's budget constraint is

Accepted Answer

A)  the limited income that a consumer has to spend on goods and services. 
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 price ratio a consumer faces in the marketplace. 
D)  the extent to which one's preferences are limited by one's income. 
A)  the limited income that a consumer has to spend on goods and services. 
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 price ratio a consumer faces in the marketplace. 
D)  the extent to which one's preferences are limited by one's income.

Question 9

The slope of the indifference curve is referred to as

Accepted Answer

A)  the marginal rate of substitution. 
B)  the price ratio. 
C)  the marginal rate of consumption. 
D)  the marginal tradeoff rate. 
A)  the marginal rate of substitution. 
B)  the price ratio. 
C)  the marginal rate of consumption. 
D)  the marginal tradeoff rate.

Question 10

Figure 10-2   Figure 10-2 represents the demand for ice cream cones.
-Refer to Figure 10-2.When the price of ice cream cones increases from $2 to $3,quantity demanded decreases from 4 ice cream cones to 3 ice cream cones.This change in quantity demanded is due to

Accepted Answer

A)  the price and output effects. 
B)  the income and substitution effects. 
C)  the law of diminishing marginal utility. 
D)  the fact that marginal willingness to pay falls. 
A)  the price and output effects. 
B)  the income and substitution effects. 
C)  the law of diminishing marginal utility. 
D)  the fact that marginal willingness to pay falls.

Question 11

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

Accepted Answer

The two effects are the substitution and

Question 12

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.Holding prices constant,when Keira's income changed from $18 to $23,her utility maximizing bundle changed.Based on your answers to her optimal choices at the two income levels,what type of goods are soup and sandwiches?

Accepted Answer

A)  Soup is an inferior good and sandwiches are a normal good. 
B)  Soup is a normal good and sandwiches are an inferior good. 
C)  Both soup and sandwiches are normal goods. 
D)  Both soup and sandwiches are inferior goods. 
A)  Soup is an inferior good and sandwiches are a normal good. 
B)  Soup is a normal good and sandwiches are an inferior good. 
C)  Both soup and sandwiches are normal goods. 
D)  Both soup and sandwiches are inferior goods.

Question 13

Which of the following is a common mistake consumers commit when they make decisions?

Accepted Answer

A)  They take into account nonmonetary opportunity costs but ignore monetary costs. 
B)  They are overly pessimistic about their future behavior. 
C)  They fail to ignore sunk costs. 
D)  They sometimes value fairness too much. 
A)  They take into account nonmonetary opportunity costs but ignore monetary costs. 
B)  They are overly pessimistic about their future behavior. 
C)  They fail to ignore sunk costs. 
D)  They sometimes value fairness too much.

Question 14

The highest-valued alternative that must be given up to engage in an activity is the definition of

Accepted Answer

A)  utility. 
B)  implicit cost. 
C)  opportunity cost. 
D)  economic sacrifice. 
A)  utility. 
B)  implicit cost. 
C)  opportunity cost. 
D)  economic sacrifice.

Question 15

A network externality occurs when

Accepted Answer

A)  there is production cost savings from being networked with suppliers. 
B)  there is production cost savings from being networked with buyers. 
C)  the usefulness of a good is affected by how many others use the good. 
D)  the usefulness of a good is affected by celebrities who use the good. 
A)  there is production cost savings from being networked with suppliers. 
B)  there is production cost savings from being networked with buyers. 
C)  the usefulness of a good is affected by how many others use the good. 
D)  the usefulness of a good is affected by celebrities who use the good.

Question 16

The income effect of an increase in the price of salmon

Accepted Answer

A)  is the change in the demand for salmon when income increases. 
B)  refers to the relative price effect - salmon is more expensive compared to other types of fish - which causes the consumer to buy less salmon. 
C)  refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant. 
D)  is the change in the demand for other types of fish, say trout, that result from a decrease in purchasing power. 
A)  is the change in the demand for salmon when income increases. 
B)  refers to the relative price effect - salmon is more expensive compared to other types of fish - which causes the consumer to buy less salmon. 
C)  refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant. 
D)  is the change in the demand for other types of fish, say trout, that result from a decrease in purchasing power.

Question 17

When diminishing marginal utility sets in,total utility must be negative.

Accepted Answer

A) True 
 B)False

Question 18

Figure 10-3  
-Refer to Figure 10-3.The Bobsey twins,Laurel and Hardy,both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

Accepted Answer

A)  They have identical movie preferences. 
B)  Laurel enjoys romantic comedies more than Hardy. 
C)  Laurel enjoys science fiction movies more than Hardy. 
D)  The diagrams do not provide any information about relative preferences. 
A)  They have identical movie preferences. 
B)  Laurel enjoys romantic comedies more than Hardy. 
C)  Laurel enjoys science fiction movies more than Hardy. 
D)  The diagrams do not provide any information about relative preferences.

Question 19

An advantage of Microsoft windows is its compatibility with the widest range of hardware and software.The dominance of Windows is self-reinforcing: hardware and software manufacturers ensure that their products are compatible with Windows in order to have access to the large number of Windows users.Which principle best describes this scenario?

Accepted Answer

A)  endowment effects 
B)  endorsement effects 
C)  economies of scale 
D)  network externalities 
A)  endowment effects 
B)  endorsement effects 
C)  economies of scale 
D)  network externalities

Question 20

Gowri has $6 per day to purchase lunch.She spends all of her lunch money on pizza and iced tea.The price of pizza is $2.00 per slice and iced tea costs $1 per bottle.
a. Draw Gowri's budget constraint and label it BC0.Put pizza on the horizontal axis and iced tea on the vertical axis.Be sure to identify the intercept values.
b. If the price of iced tea rises to $1.20 per bottle,show what will happen to her budget constraint in your diagram.Be sure to indicate any new intercept values.

Accepted Answer

a. @#IMG-DLM& b. BC₁ in the fig

Consider a downward-sloping demand curve.When the price of a normal good decreases,the income and substitution effects

Behavioral economics refers to the study of situations

All but one of the following have been suggested by some economists as possible consequences of path dependency and switching costs.Which of the following is not a possible consequence of path dependency and switching costs?

Suppose your marginal utility from consuming the 3rd slice of cake is zero,then your total utility from consuming cake is

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.If Keira maximizes her utility,how many units of each good should she buy?

Table 10-7 Table 10-7 shows Antonio's utility from beer and pizza. -Refer to Table 10-7.Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice.How many of each good will he consume when he maximizes his utility?

A consumer's budget constraint is

The slope of the indifference curve is referred to as

Figure 10-2 Figure 10-2 represents the demand for ice cream cones. -Refer to Figure 10-2.When the price of ice cream cones increases from $2 to $3,quantity demanded decreases from 4 ice cream cones to 3 ice cream cones.This change in quantity demanded is due to

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

Which of the following is a common mistake consumers commit when they make decisions?

The highest-valued alternative that must be given up to engage in an activity is the definition of

A network externality occurs when

The income effect of an increase in the price of salmon

When diminishing marginal utility sets in,total utility must be negative.

Figure 10-3 -Refer to Figure 10-3.The Bobsey twins,Laurel and Hardy,both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

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

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Exam 10: Consumer Choice and Behavioral Economics

Consider a downward-sloping demand curve.When the price of a normal good decreases,the income and substitution effects

Behavioral economics refers to the study of situations

All but one of the following have been suggested by some economists as possible consequences of path dependency and switching costs.Which of the following is not a possible consequence of path dependency and switching costs?

Suppose your marginal utility from consuming the 3rd slice of cake is zero,then your total utility from consuming cake is

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.If Keira maximizes her utility,how many units of each good should she buy?

Table 10-7 Table 10-7 shows Antonio's utility from beer and pizza. -Refer to Table 10-7.Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice.How many of each good will he consume when he maximizes his utility?

A consumer's budget constraint is

The slope of the indifference curve is referred to as

Figure 10-2 Figure 10-2 represents the demand for ice cream cones. -Refer to Figure 10-2.When the price of ice cream cones increases from $2 to $3,quantity demanded decreases from 4 ice cream cones to 3 ice cream cones.This change in quantity demanded is due to

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

Which of the following is a common mistake consumers commit when they make decisions?

The highest-valued alternative that must be given up to engage in an activity is the definition of

A network externality occurs when

The income effect of an increase in the price of salmon

When diminishing marginal utility sets in,total utility must be negative.

Figure 10-3 -Refer to Figure 10-3.The Bobsey twins,Laurel and Hardy,both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

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