Question 1

Identify the one statement that does not demonstrate how social effects influence consumer choice.

Accepted Answer

A) Students in an Economics class are required to purchase a textbook assigned by the professor. 
B) There is utility gained from consuming goods or services that others are consuming. 
C) Some products that people consume are determined by the social popularity of the products. 
D) Companies such as Zappos.com and Netflix invite their consumers to write reviews about their experience with their products which are then posted on the internet for others to see. 
A) Students in an Economics class are required to purchase a textbook assigned by the professor. 
B) There is utility gained from consuming goods or services that others are consuming. 
C) Some products that people consume are determined by the social popularity of the products. 
D) Companies such as Zappos.com and Netflix invite their consumers to write reviews about their experience with their products which are then posted on the internet for others to see.

Question 2

If you received negative marginal utility from consuming the 4th slice of pizza,then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.

Accepted Answer

A) True 
 B)False

Question 3

During its run on Broadway,the play The Producers regularly sold out all available tickets at the St.James Theater.The theater could have raised ticket prices from $75 to $125 and still sold all available tickets but chose not to do so.The best explanation for this decision is

Accepted Answer

A) theater owners are unaware of the elasticity of demand for Broadway shows. 
B) theater owners do not want to raise their prices on weekends,when demand is high,and then have to lower prices during the week,when demand is lower. 
C) firms sometimes give up profits in the short run to keep their customers happy and increase their profits in the long run. 
D) theater owners are not motivated to maximize their profits. 
A) theater owners are unaware of the elasticity of demand for Broadway shows. 
B) theater owners do not want to raise their prices on weekends,when demand is high,and then have to lower prices during the week,when demand is lower. 
C) firms sometimes give up profits in the short run to keep their customers happy and increase their profits in the long run. 
D) theater owners are not motivated to maximize their profits.

Question 4

Firms pay famous individuals to endorse their products because

Accepted Answer

A) apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product. 
B) the firms are irrational and are wasting advertising expenditures. 
C) famous people obviously know what are the best goods and services. 
D) famous people only consume high-quality products. 
A) apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product. 
B) the firms are irrational and are wasting advertising expenditures. 
C) famous people obviously know what are the best goods and services. 
D) famous people only consume high-quality products.

Question 5

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 results 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 results from a decrease in purchasing power.

Question 6

Which of the following is used to explain why a consumer's willingness to buy a cell phone increases as the number of other people who own and use cell phones increases?

Accepted Answer

A) network externalities 
B) market failure 
C) diminishing marginal utility 
D) the income effect of a price change 
A) network externalities 
B) market failure 
C) diminishing marginal utility 
D) the income effect of a price change

Question 7

Traditionally,economists have considered culture,customs,and religion as

Accepted Answer

A) very important influences on the choices consumers make. 
B) relatively unimportant factors in explaining the choices consumers make. 
C) important influences in explaining consumer choices in command economies but less important in market economies. 
D) subject to normative economic analysis rather than positive economic analysis. 
A) very important influences on the choices consumers make. 
B) relatively unimportant factors in explaining the choices consumers make. 
C) important influences in explaining consumer choices in command economies but less important in market economies. 
D) subject to normative economic analysis rather than positive economic analysis.

Question 8

The only Giffen goods that have been identified so far in the real world are luxury goods.

Accepted Answer

A) True 
 B)False

Question 9

The Wong family consumes 3 pounds of fish and 5 pounds of chicken per month.The price of fish is $8 per pound and chicken is $4 per pound.
a.What is the amount of income allocated to fish and chicken consumption?
b.What is the price ratio (the price of fish relative to the price of chicken)?
c.Explain the meaning of the price ratio you computed.
d.If the Wongs maximize utility,what must the ratio of the marginal utility of fish to the marginal utility of chicken be equal to?
e.If the price of chicken rises,will the Wong family consume more chicken,less chicken,or the same amount of chicken? Explain your answer using the rule of equal marginal utility per dollar.

Accepted Answer

a.Income = $44
b.Price of fish / price o

Question 10

Under J.C.Penney's everyday low pricing policy,the everyday low prices

Accepted Answer

A) ended up being the highest prices ever charged by the company. 
B) were always lower than the sale prices under the previous policy. 
C) were not actually charged every day,but only once a month during half-off sales. 
D) ended up being higher than the sale prices under the previous pricing policy. 
A) ended up being the highest prices ever charged by the company. 
B) were always lower than the sale prices under the previous policy. 
C) were not actually charged every day,but only once a month during half-off sales. 
D) ended up being higher than the sale prices under the previous pricing policy.

Question 11

In the ultimatum game,allocators usually offer recipients at least a 40 percent share of the money,and recipients almost always reject offers of less than a 10 percent share.Which of the following does not explain why allocators offer recipients a relatively generous share and why recipients reject meager offers?

Accepted Answer

A) Fear of arousing outrage and abhorrence could influence economic decisions. 
B) People can and often do reject offers that offend their sense of fairness even if doing so means taking a monetary loss. 
C) Some people are careful not to engage in economic behavior that might offend and alienate others. 
D) Allocators can count on recipients to ignore all considerations except financial benefit. 
A) Fear of arousing outrage and abhorrence could influence economic decisions. 
B) People can and often do reject offers that offend their sense of fairness even if doing so means taking a monetary loss. 
C) Some people are careful not to engage in economic behavior that might offend and alienate others. 
D) Allocators can count on recipients to ignore all considerations except financial benefit.

Question 12

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Apocalypse.On the day of the movie you decide that you would rather not go to the movie.According to economists,what is the rational thing to do?

Accepted Answer

A) Since the cost of the movie ticket is a sunk cost,it should not influence your decision.Your decision should be based solely on whether you want to see the movie or not. 
B) You should not waste resources.Since you have paid for the ticket you should watch the movie. 
C) Your should go to the movie to minimize your losses. 
D) You should go to the movie to maximize your utility. 
A) Since the cost of the movie ticket is a sunk cost,it should not influence your decision.Your decision should be based solely on whether you want to see the movie or not. 
B) You should not waste resources.Since you have paid for the ticket you should watch the movie. 
C) Your should go to the movie to minimize your losses. 
D) You should go to the movie to maximize your utility.

Question 13

The law of diminishing marginal utility states that

Accepted Answer

A) eventually total utility falls as more of a good is consumed,other things constant. 
B) the extra satisfaction from consuming a good decreases as more of a good is consumed,other things constant. 
C) the extra satisfaction from consuming a good increases slowly as more of a good is consumed,other things constant. 
D) when the extra satisfaction from consuming a good becomes negative,total utility starts falling,other things constant. 
A) eventually total utility falls as more of a good is consumed,other things constant. 
B) the extra satisfaction from consuming a good decreases as more of a good is consumed,other things constant. 
C) the extra satisfaction from consuming a good increases slowly as more of a good is consumed,other things constant. 
D) when the extra satisfaction from consuming a good becomes negative,total utility starts falling,other things constant.

Question 14

The satisfaction a person receives from consuming goods and services is called

Accepted Answer

A) contentment. 
B) psychic income. 
C) wealth. 
D) utility. 
A) contentment. 
B) psychic income. 
C) wealth. 
D) utility.

Question 15

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 16

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 17

The income effect of an increase in the price of peaches is

Accepted Answer

A) the change in the quantity of peaches demanded that results from the price increase,making peaches more expensive than other fruit,holding constant the effect of the price change on consumer purchasing power. 
B) the change in the demand for peaches as a result of the change in the price of peaches,holding all other factors constant. 
C) the change in the quantity of other fruit demanded that results from the impact of the price change on purchasing power,holding all other factors constant. 
D) the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power,holding all other factors constant. 
A) the change in the quantity of peaches demanded that results from the price increase,making peaches more expensive than other fruit,holding constant the effect of the price change on consumer purchasing power. 
B) the change in the demand for peaches as a result of the change in the price of peaches,holding all other factors constant. 
C) the change in the quantity of other fruit demanded that results from the impact of the price change on purchasing power,holding all other factors constant. 
D) the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power,holding all other factors constant.

Question 18

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) the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay if they did not already own it. 
B) the tendency for consumers to account for monetary costs but to ignore sunk costs. 
C) consumers placing a high value on a product because it makes them appear to be fashionable. 
D) the law of demand. 
A) the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay if they did not already own it. 
B) the tendency for consumers to account for monetary costs but to ignore sunk costs. 
C) consumers placing a high value on a product because it makes them appear to be fashionable. 
D) the law of demand.

Question 19

A significant downside to network externalities is that

Accepted Answer

A) there may be large switching costs to consumers of changing products so that consumers end up using products with inferior technologies. 
B) firms may network with unethical suppliers or distributors. 
C) the costs of using celebrity endorsements may be very high. 
D) there may be large switching costs to firms changing technologies. 
A) there may be large switching costs to consumers of changing products so that consumers end up using products with inferior technologies. 
B) firms may network with unethical suppliers or distributors. 
C) the costs of using celebrity endorsements may be very high. 
D) there may be large switching costs to firms changing technologies.

Question 20

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is maximized.

Accepted Answer

A) True 
 B)False

Exam 10: Consumer Choice and Behavioral Economics

Identify the one statement that does not demonstrate how social effects influence consumer choice.

If you received negative marginal utility from consuming the 4th slice of pizza,then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.

During its run on Broadway,the play The Producers regularly sold out all available tickets at the St.James Theater.The theater could have raised ticket prices from $75 to $125 and still sold all available tickets but chose not to do so.The best explanation for this decision is

Firms pay famous individuals to endorse their products because

The income effect of an increase in the price of salmon

Which of the following is used to explain why a consumer's willingness to buy a cell phone increases as the number of other people who own and use cell phones increases?

Traditionally,economists have considered culture,customs,and religion as

The only Giffen goods that have been identified so far in the real world are luxury goods.

Under J.C.Penney's everyday low pricing policy,the everyday low prices

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Apocalypse.On the day of the movie you decide that you would rather not go to the movie.According to economists,what is the rational thing to do?

The law of diminishing marginal utility states that

The satisfaction a person receives from consuming goods and services is called

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

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?

The income effect of an increase in the price of peaches is

A significant downside to network externalities is that

To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is maximized.

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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