Question 1

One reason college students do not study enough to get high grades is that they are unrealistic about their future behavior.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Alan Krueger conducted a survey of fans at the 2001 Super Bowl who purchased tickets to the game for $325 or $400.Krueger found that (a)94 percent of those surveyed would not have paid $3,000 for their tickets,and (b)92 percent of those surveyed would not have sold their tickets for $3,000.These results are an example of

Accepted Answer

A) rational consumer behavior. 
B) the endowment effect. 
C) the fallacy of composition. 
D) the failure to ignore sunk costs. 
A) rational consumer behavior. 
B) the endowment effect. 
C) the fallacy of composition. 
D) the failure to ignore sunk costs.

Question 4

What is an indifference curve? Why can indifference curves never cross?

Accepted Answer

An indifference curve shows the combinat

Question 5

Figure 10-6   The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy.
-Refer to Figure 10-6.A change in the price of popcorn only is shown in

Accepted Answer

A) Panel A. 
B) Panel B. 
C) Panel C. 
D) none of the above panels. 
A) Panel A. 
B) Panel B. 
C) Panel C. 
D) none of the above panels.

Question 6

Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time.In less than a week she discovered that the shoes were uncomfortable.Grace went back to wearing her old pair and stashed away the new pair.When asked by her boss,Mme.Ramotswe,why does she not simply give away the new pair,she said: "But I paid so much for them." Grace's behavior

Accepted Answer

A) is rational: she should not discard a valuable item. 
B) ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give them away or not. 
C) supports the endowment effect which states that ownership of an item makes it more valuable. 
D) is rational because the more you pay for an item the more valuable it is. 
A) is rational: she should not discard a valuable item. 
B) ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give them away or not. 
C) supports the endowment effect which states that ownership of an item makes it more valuable. 
D) is rational because the more you pay for an item the more valuable it is.

Question 7

What is the endowment effect?

Accepted Answer

A) the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than what they would be willing to pay to buy the good if they did not already own it 
B) the tendency of people to be unwilling to sell something they already own because of its sentimental value 
C) the tendency of people to overstate the value of a good they already own even though similar items can be purchased at a lower price 
D) the sum total of assets that a person has acquired over the years 
A) the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than what they would be willing to pay to buy the good if they did not already own it 
B) the tendency of people to be unwilling to sell something they already own because of its sentimental value 
C) the tendency of people to overstate the value of a good they already own even though similar items can be purchased at a lower price 
D) the sum total of assets that a person has acquired over the years

Question 8

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 9

The additional utility that George receives from consuming one more slice of pizza is called

Accepted Answer

A) average utility. 
B) marginal utility. 
C) total utility. 
D) diminishing utility. 
A) average utility. 
B) marginal utility. 
C) total utility. 
D) diminishing utility.

Question 10

Avner is maximizing total utility by buying sports magazines and protein supplements.For him to buy more sports magazines

Accepted Answer

A) the price of protein supplements.has to fall. 
B) the price of sports magazines has to fall. 
C) the price of sports magazines has to rise. 
D) Since Avner is maximizing his utility,nothing can change the consumption of sports magazines. 
A) the price of protein supplements.has to fall. 
B) the price of sports magazines has to fall. 
C) the price of sports magazines has to rise. 
D) Since Avner is maximizing his utility,nothing can change the consumption of sports magazines.

Question 11

Consumers have to make tradeoffs in deciding what to consume because

Accepted Answer

A) not all goods give them the same amount of satisfaction. 
B) the prices of goods vary. 
C) they are limited by a budget constraint. 
D) there are not enough of all goods produced. 
A) not all goods give them the same amount of satisfaction. 
B) the prices of goods vary. 
C) they are limited by a budget constraint. 
D) there are not enough of all goods produced.

Question 12

All consumption bundles along a given indifference curve are equally desirable.

Accepted Answer

A) True 
 B)False

Question 13

A common mistake made by consumers is the failure to take into account the monetary costs of their actions.

Accepted Answer

A) True 
 B)False

Question 14

If your total satisfaction increases when you consume another unit,your marginal utility must be

Accepted Answer

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

Question 15

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Burgers }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Pepsi }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Utility }
\end{array} \
\hline 1 & 20 & 1 & 30 \
\hline 2 & 14 & 2 & 10 \
\hline 3 & 10 & 3 & 7 \
\hline 4 & 3 & 4 & 5 \
\hline 5 & 1 & 5 & 1 \
\hline 6 & - 5 & 6 & 0 \
\hline 7 & - 10 & 7 & - 4 \
\hline
\end{array}$$ Table 10-6 lists Jay's marginal utilities for burgers and Pepsi.Jay has $7 to spend on these two goods.The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 10-6.If Jay can eat all the burgers he wants for free,how many burgers will he consume?

Accepted Answer

A) 7 burgers 
B) 6 burgers 
C) 5 burgers 
D) 3 burgers 
A) 7 burgers 
B) 6 burgers 
C) 5 burgers 
D) 3 burgers

Question 16

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 17

The substitution effect of a decrease in the price of movie tickets results in

Accepted Answer

A) an increase in the quantity of movie tickets demanded. 
B) a decrease in the quantity of movie tickets demanded. 
C) an increase in the demand for movie tickets. 
D) a decrease in the demand for movie tickets. 
A) an increase in the quantity of movie tickets demanded. 
B) a decrease in the quantity of movie tickets demanded. 
C) an increase in the demand for movie tickets. 
D) a decrease in the demand for movie tickets.

Question 18

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card,even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?

Accepted Answer

The processing companies are taking adva

Question 19

If a consumer receives 20 units of utility from consuming two candy bars,and 25 units of utility from consuming three candy bars,the marginal utility of the second candy bar is

Accepted Answer

A) 25 utility units. 
B) 20 utility units. 
C) 5 utility units. 
D) unknown as more information is needed to determine the answer. 
A) 25 utility units. 
B) 20 utility units. 
C) 5 utility units. 
D) unknown as more information is needed to determine the answer.

Question 20

Farah has $100 to spend each month on bread and chicken.Suppose the price of bread is $4 a loaf and the price of chicken is $5 per pound.
a.Draw her budget constraint and label it BC0.Put bread on the horizontal axis and chicken on the vertical axis.Be sure to identify the intercept values.
b.Suppose Farah is a utility maximizer and she consumes 10 loaves of bread and 12 pounds of chicken.On the same graph you drew in part (a),draw an indifference curve to identify her optimal bundle.Label this bundle "E."
c.Is her budget exhausted? Verify your answer.
d.Now suppose Farah's income falls to so that she can now devote $80 to the two goods.Prices however remain unchanged.In the same diagram,graph her new budget constraint and label it BC1.Be sure to identify any new intercept values.
e.Following the change in income,can Farah consume the same bundle "E"? Explain your answer.
f.What must happen to her total utility following the decrease in her income?

Accepted Answer

a.See the figure below
b.See the figure

Exam 10: Consumer Choice and Behavioral Economics

One reason college students do not study enough to get high grades is that they are unrealistic about their future behavior.

What is an indifference curve? Why can indifference curves never cross?

Figure 10-6 The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy. -Refer to Figure 10-6.A change in the price of popcorn only is shown in

What is the endowment effect?

The slope of the indifference curve is referred to as

The additional utility that George receives from consuming one more slice of pizza is called

Avner is maximizing total utility by buying sports magazines and protein supplements.For him to buy more sports magazines

Consumers have to make tradeoffs in deciding what to consume because

All consumption bundles along a given indifference curve are equally desirable.

A common mistake made by consumers is the failure to take into account the monetary costs of their actions.

If your total satisfaction increases when you consume another unit,your marginal utility must be

The substitution effect of a decrease in the price of movie tickets results in

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card,even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?

If a consumer receives 20 units of utility from consuming two candy bars,and 25 units of utility from consuming three candy bars,the marginal utility of the second candy bar is

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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