Question 1

In their surveys of consumers,Daniel Kahneman,Jack Knetsch and Richard Thaler found that

Accepted Answer

A) most people considered it unfair for firms to raise their prices because of an increase in their costs,but fair to raise their prices after an increase in demand. 
B) most people considered any increase in price to be unfair as it led to an increase in profits. 
C) most people believed that low-income people were hurt most by increases in prices. 
D) most people considered an increase in price by firms following an increase in their costs to be fair but believed it was unfair for firms to raise their prices because of an increase in demand. 
A) most people considered it unfair for firms to raise their prices because of an increase in their costs,but fair to raise their prices after an increase in demand. 
B) most people considered any increase in price to be unfair as it led to an increase in profits. 
C) most people believed that low-income people were hurt most by increases in prices. 
D) most people considered an increase in price by firms following an increase in their costs to be fair but believed it was unfair for firms to raise their prices because of an increase in demand.

Question 2

Many people leave their servers tips in restaurants,even when they are not likely to visit the restaurant again.This is evidence that

Accepted Answer

A) people would rather pay for good service at an inexpensive restaurant than pay higher prices and receive poor service at an expensive restaurant. 
B) people enjoy eating at restaurants more than eating at home. 
C) people treat others fairly even if doing so makes them worse off financially. 
D) there has been an improvement in the service people receive in restaurants over time,partly because the restaurant industry has become more competitive. 
A) people would rather pay for good service at an inexpensive restaurant than pay higher prices and receive poor service at an expensive restaurant. 
B) people enjoy eating at restaurants more than eating at home. 
C) people treat others fairly even if doing so makes them worse off financially. 
D) there has been an improvement in the service people receive in restaurants over time,partly because the restaurant industry has become more competitive.

Question 3

The income effect of a price change refers to

Accepted Answer

A) the change in demand that occurs when consumer income changes. 
B) the change in the quantity demanded that results from a change in price,making the good more or less expensive relative to other goods,holding everything else constant. 
C) the change in demand that occurs when both income and price change. 
D) the change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power,holding everything else constant. 
A) the change in demand that occurs when consumer income changes. 
B) the change in the quantity demanded that results from a change in price,making the good more or less expensive relative to other goods,holding everything else constant. 
C) the change in demand that occurs when both income and price change. 
D) the change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power,holding everything else constant.

Question 4

Economists do not think it is possible to compare the relative utility that two people get from consuming an additional unit of a particular good.

Accepted Answer

A) True 
 B)False

Question 5

If,as a person consumes more and more of a good,each additional unit adds less satisfaction than the previous unit consumed,we are seeing the workings of

Accepted Answer

A) the law of demand. 
B) the law of supply. 
C) the law of increasing marginal opportunity cost. 
D) the law of diminishing marginal utility. 
A) the law of demand. 
B) the law of supply. 
C) the law of increasing marginal opportunity cost. 
D) the law of diminishing marginal utility.

Question 6

All but one of the following economists were awarded a Nobel prize for their contributions to experimental economics and their explorations of the influence fairness has on consumer decision-making.Which economist did not receive a Nobel Prize for this work?

Accepted Answer

A) Vernon Smith 
B) Alan Krueger 
C) Daniel Kahneman 
D) Maurice Allais 
A) Vernon Smith 
B) Alan Krueger 
C) Daniel Kahneman 
D) Maurice Allais

Question 7

What is a Giffen good?

Accepted Answer

A Giffen good is something con

Question 8

The marginal rate of substitution is determined by the slope of an indifference curve.

Accepted Answer

A) True 
 B)False

Question 9

Studies on consumer behavior have found that most people value fairness enough that they will refuse to participate in transactions they consider unfair,even if they are worse off as a result.How does this affect a firm's decision to raise prices in the event of a temporary increase in demand?

Accepted Answer

If the firm chooses to raise prices,cons

Question 10

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 11

What is an indifference curve?

Accepted Answer

A) It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods. 
B) It is a curve that shows the combinations of consumption bundles that give the consumer the same utility. 
C) It is a curve that ranks a consumer's preference for various consumption bundles. 
D) It is a curve that shows the tradeoff a consumer faces among different combinations of consumption bundles. 
A) It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods. 
B) It is a curve that shows the combinations of consumption bundles that give the consumer the same utility. 
C) It is a curve that ranks a consumer's preference for various consumption bundles. 
D) It is a curve that shows the tradeoff a consumer faces among different combinations of consumption bundles.

Question 12

Which of the following is held constant along an indifference curve?

Accepted Answer

A) the prices of the goods in question 
B) the marginal rate of substitution between the two goods in question 
C) the marginal utility derived from consuming any bundle of goods on the indifference curve 
D) the total utility derived from consuming any bundle of goods on the indifference curve 
A) the prices of the goods in question 
B) the marginal rate of substitution between the two goods in question 
C) the marginal utility derived from consuming any bundle of goods on the indifference curve 
D) the total utility derived from consuming any bundle of goods on the indifference curve

Question 13

If a consumer receives 22 units of marginal utility for consuming the first can of soda,20 units from consuming the second,and 15 from the third,the total utility of consuming the three units is

Accepted Answer

A) 57 utility units. 
B) 35 utility units. 
C) 15 utility units. 
D) unknown as more information is needed to determine the answer. 
A) 57 utility units. 
B) 35 utility units. 
C) 15 utility units. 
D) unknown as more information is needed to determine the answer.

Question 14

If Dawson prefers pizza to hamburgers and hamburgers to hot dogs,then if preferences are transitive

Accepted Answer

A) at times she could be indifferent among the three items. 
B) she must prefer pizza to hot dogs. 
C) she could prefer hamburgers to pizza on some occasions but not hot dogs to pizza. 
D) she could prefer hot dogs to pizza on some occasions but not hamburgers to hot dogs. 
A) at times she could be indifferent among the three items. 
B) she must prefer pizza to hot dogs. 
C) she could prefer hamburgers to pizza on some occasions but not hot dogs to pizza. 
D) she could prefer hot dogs to pizza on some occasions but not hamburgers to hot dogs.

Question 15

An item has utility for a consumer if it

Accepted Answer

A) is scarce. 
B) has a high price. 
C) is something everyone else wants. 
D) generates enjoyment or satisfaction. 
A) is scarce. 
B) has a high price. 
C) is something everyone else wants. 
D) generates enjoyment or satisfaction.

Question 16

A budget constraint

Accepted Answer

A) represents the bundles of consumption that make a consumer equally happy. 
B) refers to the limited amount of income available to consumers to spend on goods and services. 
C) reflects the desire by consumers to increase their income. 
D) shows the prices that a consumer chooses to pay for products he consumes. 
A) represents the bundles of consumption that make a consumer equally happy. 
B) refers to the limited amount of income available to consumers to spend on goods and services. 
C) reflects the desire by consumers to increase their income. 
D) shows the prices that a consumer chooses to pay for products he consumes.

Question 17

Most people would prefer to drive a luxury car that has all the options,but more people buy less expensive cars even though they could afford the luxury car because

Accepted Answer

A) car buyers are irrational. 
B) the total utility of less expensive cars is greater than that of luxury cars. 
C) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars. 
D) luxury cars cost a lot more than non-luxury cars. 
A) car buyers are irrational. 
B) the total utility of less expensive cars is greater than that of luxury cars. 
C) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars. 
D) luxury cars cost a lot more than non-luxury cars.

Question 18

The income effect of a price increase for a Giffen good outweighs the substitution effect.

Accepted Answer

A) True 
 B)False

Question 19

Health clubs typically experience an increase in one-year memberships in January,but many new customers cancel their memberships before the end of the year.Which of the following is the best explanation for this behavior?

Accepted Answer

A) Some health club members suffer minor injuries that prevent them from working out. 
B) Some people are overly optimistic about their future behavior. 
C) Some people fail to treat their membership fees as sunk costs. 
D) Some members receive utility from activities they believe are popular. 
A) Some health club members suffer minor injuries that prevent them from working out. 
B) Some people are overly optimistic about their future behavior. 
C) Some people fail to treat their membership fees as sunk costs. 
D) Some members receive utility from activities they believe are popular.

Question 20

A sunk cost is a cost that has already been paid and cannot be recovered.

Accepted Answer

A) True 
 B)False

Exam 10: Consumer Choice and Behavioral Economics

In their surveys of consumers,Daniel Kahneman,Jack Knetsch and Richard Thaler found that

Many people leave their servers tips in restaurants,even when they are not likely to visit the restaurant again.This is evidence that

The income effect of a price change refers to

Economists do not think it is possible to compare the relative utility that two people get from consuming an additional unit of a particular good.

If,as a person consumes more and more of a good,each additional unit adds less satisfaction than the previous unit consumed,we are seeing the workings of

All but one of the following economists were awarded a Nobel prize for their contributions to experimental economics and their explorations of the influence fairness has on consumer decision-making.Which economist did not receive a Nobel Prize for this work?

What is a Giffen good?

The marginal rate of substitution is determined by the slope of an indifference curve.

Studies on consumer behavior have found that most people value fairness enough that they will refuse to participate in transactions they consider unfair,even if they are worse off as a result.How does this affect a firm's decision to raise prices in the event of a temporary increase in demand?

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

What is an indifference curve?

Which of the following is held constant along an indifference curve?

If a consumer receives 22 units of marginal utility for consuming the first can of soda,20 units from consuming the second,and 15 from the third,the total utility of consuming the three units is

If Dawson prefers pizza to hamburgers and hamburgers to hot dogs,then if preferences are transitive

An item has utility for a consumer if it

A budget constraint

Most people would prefer to drive a luxury car that has all the options,but more people buy less expensive cars even though they could afford the luxury car because

The income effect of a price increase for a Giffen good outweighs the substitution effect.

Health clubs typically experience an increase in one-year memberships in January,but many new customers cancel their memberships before the end of the year.Which of the following is the best explanation for this behavior?

A sunk cost is a cost that has already been paid and cannot be recovered.

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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