Question 1

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 2

Table 10-4
 $$\begin{array} { | c | c | c | c | c | } 
\hline & \text { Steak \& Cheese } & \text { Steak \& Cheese } & \text { Grilled Chicken } & \text { Grilled Chicken } \
\hline \text { Quantity } & \boldsymbol { M } \boldsymbol { U } & \boldsymbol { M U} / \boldsymbol { P } & \boldsymbol { M } \boldsymbol { U } & \boldsymbol { M U / P } \
\hline 1 & 40 & 10 & 30 & 15 \
\hline 2 & 32 & 8 & 24 & 12 \
\hline 3 & 20 & 5 & 16 & 8 \
\hline 4 & 12 & 3 & 12 & 6 \
\hline 5 & 6 & 1.5 & 8 & 4 \
\hline 6 & 2 & 0.5 & 4 & 2 \
\hline
\end{array}$$
-Refer to Table 10-4.For steak and cheese sandwiches and grilled chicken sandwiches,the table contains the values of the marginal utility (MU)and marginal utility per dollar (MU/P)for Mabel Jarvis.Mabel has $14 to spend on steak and cheese sandwiches and grilled chicken sandwiches.Which of the following statements is false?

Accepted Answer

A) The price of steak and cheese sandwiches is $4.The price of grilled chicken sandwiches is $2. 
B) If Mabel maximizes her utility she will buy three grilled chicken sandwiches. 
C) If Mabel maximizes her utility she will buy two steak and cheese sandwiches. 
D) We do not have enough information to determine how many sandwiches Mabel will buy to maximize her utility. 
A) The price of steak and cheese sandwiches is $4.The price of grilled chicken sandwiches is $2. 
B) If Mabel maximizes her utility she will buy three grilled chicken sandwiches. 
C) If Mabel maximizes her utility she will buy two steak and cheese sandwiches. 
D) We do not have enough information to determine how many sandwiches Mabel will buy to maximize her utility.

Question 3

If you exhibit the endowment effect as a decision maker,then you are

Accepted Answer

A) deciding on the basis of sunk costs. 
B) buying something you can't really afford because you expect to save in the future. 
C) ignoring non-monetary opportunity costs. 
D) consuming based on celebrity endorsements. 
A) deciding on the basis of sunk costs. 
B) buying something you can't really afford because you expect to save in the future. 
C) ignoring non-monetary opportunity costs. 
D) consuming based on celebrity endorsements.

Question 4

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 5

There are two conditions necessary for a consumer to maximize her utility.One is that the marginal utilities per dollar spent on each good and service consumed are equal.What is the other condition?

Accepted Answer

A) Total spending on all goods and services must equal the amount available to be spent. 
B) The consumer must be satisfied with the choices she makes. 
C) The total spent on each good and service is the same. 
D) The prices of each good and service consumed must not be too high. 
A) Total spending on all goods and services must equal the amount available to be spent. 
B) The consumer must be satisfied with the choices she makes. 
C) The total spent on each good and service is the same. 
D) The prices of each good and service consumed must not be too high.

Question 6

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,causes 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,causes consumers to buy less Raisin Bran.

Question 7

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 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 8

Uber uses what is known as surge pricing to set prices based on the number of people who request rides at a given time in a given area.Based on this pricing method,prices will

Accepted Answer

A) fall when supply decreases. 
B) rise when supply increases. 
C) rise when demand increases. 
D) rise when demand decreases. 
A) fall when supply decreases. 
B) rise when supply increases. 
C) rise when demand increases. 
D) rise when demand decreases.

Question 9

If a consumer always buys goods rationally,then

Accepted Answer

A) the total utilities of the different goods consumed will be equal. 
B) the average utilities of the different goods consumed will be equal. 
C) the marginal utility per dollar spent on all goods will be equal. 
D) the marginal utility of the different goods consumed will be equal. 
A) the total utilities of the different goods consumed will be equal. 
B) the average utilities of the different goods consumed will be equal. 
C) the marginal utility per dollar spent on all goods will be equal. 
D) the marginal utility of the different goods consumed will be equal.

Question 10

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 11

The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears.To maximize his utility,what should Harold do?

Accepted Answer

A) He should acquire more income so that he can afford to buy more oranges and pears. 
B) He should reduce his consumption of both oranges and pears so that he can buy a greater variety of goods. 
C) He should buy fewer pears and more oranges. 
D) He should buy fewer oranges and more pears. 
A) He should acquire more income so that he can afford to buy more oranges and pears. 
B) He should reduce his consumption of both oranges and pears so that he can buy a greater variety of goods. 
C) He should buy fewer pears and more oranges. 
D) He should buy fewer oranges and more pears.

Question 12

Article Summary
The use of celebrities to endorse products remains a popular way for many companies to attract customers and keep their products relevant to their customers.The article discusses five factors that must be examined by a company when choosing a celebrity to endorse its product:
1.The cost of a superstar versus the value of a rising star
2.Finding a good fit between the celebrity and the image of the brand
3.Choosing someone who will promote the brand
4.Identifying valid metrics to measure success
5.The future appeal of the celebrity
Carefully chosen celebrity endorsements have proven to influence customers and enhance a brand's reputation,but as the list indicates,not all celebrities are the right fit for all products.
-Refer to the Article Summary.Economists refer to an increase in sales due to celebrity endorsements as being the result of

Accepted Answer

A) network externalities. 
B) the endowment effect. 
C) social influence. 
D) the ultimatum game. 
A) network externalities. 
B) the endowment effect. 
C) social influence. 
D) the ultimatum game.

Question 13

The endowment effect suggests that that people

Accepted Answer

A) have a strong attachment to their entitlement,regardless of whether they paid to acquire it. 
B) have a strong sense of fairness. 
C) are concerned about the welfare of others. 
D) act in ways to distort market prices. 
A) have a strong attachment to their entitlement,regardless of whether they paid to acquire it. 
B) have a strong sense of fairness. 
C) are concerned about the welfare of others. 
D) act in ways to distort market prices.

Question 14

The word "util" has been used by economists in the past as an objective measure of utility.Today economists believe that

Accepted Answer

A) utility cannot be measured objectively. 
B) utility can be measured objectively because people can use prices of different goods to measure utility. 
C) all of the important conclusions of the economic model of consumer behavior depend on utility being measured objectively. 
D) the util truly is an objective,rather than a subjective,measure of utility. 
A) utility cannot be measured objectively. 
B) utility can be measured objectively because people can use prices of different goods to measure utility. 
C) all of the important conclusions of the economic model of consumer behavior depend on utility being measured objectively. 
D) the util truly is an objective,rather than a subjective,measure of utility.

Question 15

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

Accepted Answer

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

Question 16

Manuri has $300 to spend on Pilates classes and Yoga classes.The price of a group Pilates class is $20 and the price of a group Yoga class is $10.Manuri's optimal bundle is given by "A" in Figure 10-7.
-Refer to Figure 10-7.Suppose the price of Pilates sessions rises to $30 while income and the price of Yoga sessions remain unchanged.What is her new optimal bundle?

Accepted Answer

A) still remains at bundle A. 
B) bundle B. 
C) bundle C. 
D) bundle D. 
A) still remains at bundle A. 
B) bundle B. 
C) bundle C. 
D) bundle D.

Question 17

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 DVD if the budget constraint is BC1?

Accepted Answer

A) $10 
B) $20 
C) $24 
D) $40 
A) $10 
B) $20 
C) $24 
D) $40

Question 18

When the price of audio books,a normal good,falls,causing your purchasing power to rise,you buy more of them due to

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 19

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 20

Economists assume people's tastes are identical.

Accepted Answer

A) True 
 B)False

Exam 10: Consumer Choice and Behavioral Economics

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

If you exhibit the endowment effect as a decision maker,then you are

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

There are two conditions necessary for a consumer to maximize her utility.One is that the marginal utilities per dollar spent on each good and service consumed are equal.What is the other condition?

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

Uber uses what is known as surge pricing to set prices based on the number of people who request rides at a given time in a given area.Based on this pricing method,prices will

If a consumer always buys goods rationally,then

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

The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears.To maximize his utility,what should Harold do?

The endowment effect suggests that that people

The word "util" has been used by economists in the past as an objective measure of utility.Today economists believe that

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

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 DVD if the budget constraint is BC1?

When the price of audio books,a normal good,falls,causing your purchasing power to rise,you buy more of them due to

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

Economists assume people's tastes are identical.

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

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