Question 1

Suppose the marginal utilities for the first three cans of soda are 100,80 and 60,respectively.The total utility received from consuming 2 cans is

Accepted Answer

A) 20. 
B) 80. 
C) 90. 
D) 180. 
A) 20. 
B) 80. 
C) 90. 
D) 180. D

Question 2

If Lisa spends her income on veggie burgers and pints of soy milk and the price of veggie burgers is three times the price of a pint of soy milk,then when Lisa maximizes her utility she will buy

Accepted Answer

A) both goods until the marginal utility of veggie burgers is three times the marginal utility of soy milk. 
B) three times as many veggie burgers as pints of soy milk. 
C) three times as many pints of soy milk as veggie burgers. 
D) both goods until the marginal utility of a pint of soy milk is three times the marginal utility of veggie burgers. 
A) both goods until the marginal utility of veggie burgers is three times the marginal utility of soy milk. 
B) three times as many veggie burgers as pints of soy milk. 
C) three times as many pints of soy milk as veggie burgers. 
D) both goods until the marginal utility of a pint of soy milk is three times the marginal utility of veggie burgers. A

Question 3

Table 10-3
 $$\begin{array} { | c | c | c | } 
\hline & \text { Ice Cream Cones } & \text { Lime Fizz Soda } \
\hline \text { Quantity } & \boldsymbol { M } \boldsymbol { U } & \boldsymbol { M U } \
\hline 1 & 30 & 40 \
\hline 2 & 25 & 35 \
\hline 3 & 20 & 26 \
\hline 4 & 15 & 18 \
\hline 5 & 10 & 15 \
\hline 6 & 5 & 7 \
\hline
\end{array}$$
-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. A

Question 4

Why do convex indifference curve have a negative slope?

Accepted Answer

A) because consumers take market prices as given 
B) because consumers face a budget constraint 
C) because to keep utility constant,a consumer must get more of one good if she is to give up some of the other 
D) because scarcity implies that it is not possible to consume more of one good without giving up some of the other 
A) because consumers take market prices as given 
B) because consumers face a budget constraint 
C) because to keep utility constant,a consumer must get more of one good if she is to give up some of the other 
D) because scarcity implies that it is not possible to consume more of one good without giving up some of the other

Question 5

One reason that consumers and businesses might not act rationally is

Accepted Answer

A) it is difficult to obtain enough information about the elasticities of demand and supply. 
B) they may not realize their actions are inconsistent with their goals. 
C) consumer tastes change constantly. 
D) they do not always value fairness when they make choices. 
A) it is difficult to obtain enough information about the elasticities of demand and supply. 
B) they may not realize their actions are inconsistent with their goals. 
C) consumer tastes change constantly. 
D) they do not always value fairness when they make choices.

Question 6

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 7

The income effect of a price increase causes a decrease in the quantity of a normal good demanded.

Accepted Answer

A) True 
 B)False

Question 8

The demand curve for a luxury good is upward sloping.

Accepted Answer

A) True 
 B)False

Question 9

Economists usually assume that people act in a rational,self-interested way.In explaining how consumers make choices this means that economists believe

Accepted Answer

A) consumers will always buy goods and services at the lowest possible prices. 
B) consumers spend their incomes to order to accumulate the most goods and services. 
C) consumers make choices that will leave them as satisfied as possible given their incomes,tastes,and the prices of goods and services available to them. 
D) consumers will spend their incomes and time on activities that benefit themselves as much as possible,without regard to the welfare of others. 
A) consumers will always buy goods and services at the lowest possible prices. 
B) consumers spend their incomes to order to accumulate the most goods and services. 
C) consumers make choices that will leave them as satisfied as possible given their incomes,tastes,and the prices of goods and services available to them. 
D) consumers will spend their incomes and time on activities that benefit themselves as much as possible,without regard to the welfare of others.

Question 10

The enjoyment or satisfaction people receive from consuming goods and services is called utility.

Accepted Answer

A) True 
 B)False

Question 11

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Pita Wraps }
\end{array} & \text { Total Utility } & \begin{array} { c } 
\text { Quantity of } \
\text { Bubble Tea }
\end{array} & \text { Total Utility } \
\hline 1 & 60 & 1 & 40 \
\hline 2 & 102 & 2 & 70 \
\hline 3 & 132 & 3 & 91 \
\hline 4 & 144 & 4 & 106 \
\hline 5 & 144 & 5 & 112 \
\hline 6 & 138 & 6 & 115 \
\hline 7 & 128 & 7 & 115 \
\hline
\end{array}$$ Keegan has $30 to spend on Pita Wraps and Bubble Tea.The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3.Table 10-1 shows his total utility from different quantities of the two items.
-Refer to Table 10-1.What is Keegan's optimal consumption bundle?

Accepted Answer

A) 3 pita wraps and 3 bubble teas 
B) 3 pita wraps and 4 bubble teas 
C) 4 pita wraps and 2 bubble teas 
D) 5 pita wraps and 0 bubble teas 
A) 3 pita wraps and 3 bubble teas 
B) 3 pita wraps and 4 bubble teas 
C) 4 pita wraps and 2 bubble teas 
D) 5 pita wraps and 0 bubble teas

Question 12

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Soup (cups) }
\end{array} & \text { Total Utility } & \begin{array} { c } 
\text { Quantity of } \
\text { Sandwiches }
\end{array} & \text { Total Utility } \
\hline 1 & 40 & 1 & 45 \
\hline 2 & 60 & 2 & 75 \
\hline 3 & 72 & 3 & 102 \
\hline 4 & 82 & 4 & 120 \
\hline 5 & 88 & 5 & 135 \
\hline 6 & 90 & 6 & 145 \
\hline
\end{array}$$ 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 13

Behavioral economists examine choices that consumers make that are not economically rational.Economists generally assume that people are rational;that is,they weigh the benefits and costs of an action and choose an action only if the benefits outweigh the costs.Why do consumers not act rationally when the result is that they make themselves worse off?

Accepted Answer

Most people who do not act rationally do

Question 14

Explain the concept of network externalities.

Accepted Answer

A network externality is a sit

Question 15

Economists Gary Becker and Kevin Murphy are associated with which of the following?

Accepted Answer

A) They discovered the first example of a Giffen good. 
B) They have argued that social factors are not important in explaining the choices consumers make. 
C) Consumers appear to receive utility from consuming goods they believe are popular. 
D) They discovered that price changes have both income and substitution effects. 
A) They discovered the first example of a Giffen good. 
B) They have argued that social factors are not important in explaining the choices consumers make. 
C) Consumers appear to receive utility from consuming goods they believe are popular. 
D) They discovered that price changes have both income and substitution effects.

Question 16

Figure 10-3  
-Refer to Figure 10-3.Best friends 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 17

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 18

All of the following products are likely to have significant network externalities except

Accepted Answer

A) cat food. 
B) cell phones. 
C) popular board games. 
D) Twitter. 
A) cat food. 
B) cell phones. 
C) popular board games. 
D) Twitter.

Question 19

Consider a downward-sloping demand curve.When the price of a normal good increases,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 20

The substitution effect of a change in the price of cauliflower is the portion of the change in the quantity of cauliflower demanded that can be attributed to the change in the price of a substitute vegetable such as asparagus.

Accepted Answer

A) True 
 B)False

Exam 10: Consumer Choice and Behavioral Economics

Suppose the marginal utilities for the first three cans of soda are 100,80 and 60,respectively.The total utility received from consuming 2 cans is

If Lisa spends her income on veggie burgers and pints of soy milk and the price of veggie burgers is three times the price of a pint of soy milk,then when Lisa maximizes her utility she will buy

Why do convex indifference curve have a negative slope?

One reason that consumers and businesses might not act rationally is

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

The income effect of a price increase causes a decrease in the quantity of a normal good demanded.

The demand curve for a luxury good is upward sloping.

Economists usually assume that people act in a rational,self-interested way.In explaining how consumers make choices this means that economists believe

The enjoyment or satisfaction people receive from consuming goods and services is called utility.

Explain the concept of network externalities.

Economists Gary Becker and Kevin Murphy are associated with which of the following?

Figure 10-3 -Refer to Figure 10-3.Best friends 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?

Total utility

All of the following products are likely to have significant network externalities except

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

The substitution effect of a change in the price of cauliflower is the portion of the change in the quantity of cauliflower demanded that can be attributed to the change in the price of a substitute vegetable such as asparagus.

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

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters