Question 1

When the price of summer tank tops falls and you buy more of them because they are relatively less expensive,this is called

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 2

A network externality refers to a situation in which the usefulness of a product decreases with the number of consumers who use it.

Accepted Answer

A) True 
 B)False

Question 3

The observation that people tend to value something more highly when they own it than when they don't is called the

Accepted Answer

A) wealth effect. 
B) endowment effect. 
C) path-dependent effect. 
D) endorsement effect. 
A) wealth effect. 
B) endowment effect. 
C) path-dependent effect. 
D) endorsement effect.

Question 4

Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea.The price of a pineapple is $4 and the price of a bottle of green tea is $2.The table below shows Arnie's utility values.Use the table to answer the questions that follow the table.
 $\begin{array}{|c|c|c|c|c|c|c|c|} 
\hline&&& \text {Marginal}& \text {Quantity }&&&\text {Marginal}\
 \text {Quantity of }& \text {Total }&\text { Marginal }& \text {Utility per}& \text {of  Green}&\text {Total }&\text {Marginal}&\text {Utility per}\ 
 \text {Pineapples}& \text {Utility}& \text {Utility}& \text {Dollar}& \text { Tea}&\text {Utility}&\text {Utility}& \text {Dollar} \
\hline 1 & 32 & & & 1 & 28&& \
\hline 2 & 52 & & & 2 & 46&& \
\hline 3 & 64 & & & 3 & 54 &&\
\hline 4 & 68 & & & 4 & 60&& \
\hline 5 & 70 & & & 5 & 64 &&\
\hline 6 & 71 & & & 6 & 66&& \
\hline 7 & 71 & & & 7 & 67&&\
\hline 
\end{array}$
 a.Complete the table by filling in the blank spaces.
b.Suppose Arnold purchases 4 pineapples and 2 bottles of green tea.Is he consuming the optimal consumption bundle? If so,explain why.If not,what combination should he buy and why?

Accepted Answer

a.
 b.If Arnold purchases 4 pineapples a

Question 5

The demand curve for corn is downward sloping.If the price of corn,an inferior good,falls,then

Accepted Answer

A) the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases,resulting in a net increase in quantity demanded. 
B) the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases,resulting in a net increase in quantity demanded. 
C) both the income and substitution effects reinforce each other to increase the quantity demanded. 
D) the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn. 
A) the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases,resulting in a net increase in quantity demanded. 
B) the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases,resulting in a net increase in quantity demanded. 
C) both the income and substitution effects reinforce each other to increase the quantity demanded. 
D) the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn.

Question 6

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed,Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

Accepted Answer

A) income effect only or substitution effect only but not both effects 
B) income and substitution effects 
C) price effect 
D) consumption effect 
A) income effect only or substitution effect only but not both effects 
B) income and substitution effects 
C) price effect 
D) consumption effect

Question 7

A study discussed in the Making the Connection feature in the text found that there is ________ that some consumers are not well aware of prices,even for goods they buy regularly.

Accepted Answer

A) no evidence 
B) substantial evidence 
C) little evidence 
D) no reason to believe 
A) no evidence 
B) substantial evidence 
C) little evidence 
D) no reason to believe

Question 8

Figure 10-1  
-Refer to Figure 10-1.Which of the following statements is true?

Accepted Answer

A) Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B) Quantities Q0 and Q1 may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C) Quantity Q0 could be a utility-maximizing choice if the price is $5.75,but quantity Q1 may not be because we have no information on the marginal utility per dollar when price changes. 
D) Quantities Q0 and Q1 are derived independently of the utility-maximizing model. 
A) Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B) Quantities Q0 and Q1 may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C) Quantity Q0 could be a utility-maximizing choice if the price is $5.75,but quantity Q1 may not be because we have no information on the marginal utility per dollar when price changes. 
D) Quantities Q0 and Q1 are derived independently of the utility-maximizing model.

Question 9

Suppose Joe is maximizing total utility within his budget constraint.If the price of the last pair of jeans purchased is $25 and it yields 100 units of extra satisfaction and the price of the last shirt purchased is $20,then,using the rule of equal marginal utility per dollar spent,the extra satisfaction received from the last shirt must be

Accepted Answer

A) 2,000 units of utility. 
B) 500 units of utility. 
C) 100 units of utility. 
D) 80 units of utility. 
A) 2,000 units of utility. 
B) 500 units of utility. 
C) 100 units of utility. 
D) 80 units of utility.

Question 10

An increase in income results in an outward shift of an indifference curve.

Accepted Answer

A) True 
 B)False

Question 11

The income effect of a decrease in the price of legal services,a normal good,results in

Accepted Answer

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

Question 12

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.Which diagram demonstrates an increase in total utility following a decrease in the price of popcorn?

Accepted Answer

A) the movement from d to e in Panel A 
B) the movement from f to g in Panel B 
C) the movement from h to k in Panel C 
D) none of the above 
A) the movement from d to e in Panel A 
B) the movement from f to g in Panel B 
C) the movement from h to k in Panel C 
D) none of the above

Question 13

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 income 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 14

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Beer (glasses) }
\end{array} & \text { Total Utility } & \begin{array} { c } 
\text { Quantity of } \
\text { Pizza (slices) }
\end{array} & \text { Total Utility } \
\hline 1 & 25 & 1 & 20 \
\hline 2 & 45 & 2 & 35 \
\hline 3 & 60 & 3 & 45 \
\hline 4 & 65 & 4 & 50 \
\hline 5 & 69 & 5 & 52 \
\hline 6 & 70 & 6 & 52 \
\hline
\end{array}$$ Table 10-7 shows Antonio's utility from beer and pizza.
-Refer to Table 10-7.Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice.How many of each good will he consume when he maximizes his utility?

Accepted Answer

A) 2 glasses of beer,1 slice of pizza 
B) 2 glasses of beer,3 slices of pizza 
C) 3 glasses of beer,2 slices of pizza 
D) 4 glasses of beer,5 slices of pizza 
A) 2 glasses of beer,1 slice of pizza 
B) 2 glasses of beer,3 slices of pizza 
C) 3 glasses of beer,2 slices of pizza 
D) 4 glasses of beer,5 slices of pizza

Question 15

The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

Accepted Answer

A) maximizing behavior. 
B) economizing behavior. 
C) the price constraint. 
D) the budget constraint. 
A) maximizing behavior. 
B) economizing behavior. 
C) the price constraint. 
D) the budget constraint.

Question 16

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

Accepted Answer

A) Petra's utility from her second apple was less than her satisfaction from her first orange. 
B) Hudson enjoyed his second slice of pizza more than his first. 
C) Sabine's utility from her first granola bar is greater than Rachel's utility from her second granola bar. 
D) Wesley enjoyed his second bottle of iced tea less than his first bottle,other things constant. 
A) Petra's utility from her second apple was less than her satisfaction from her first orange. 
B) Hudson enjoyed his second slice of pizza more than his first. 
C) Sabine's utility from her first granola bar is greater than Rachel's utility from her second granola bar. 
D) Wesley enjoyed his second bottle of iced tea less than his first bottle,other things constant.

Question 17

If marginal utility of apples is diminishing and is a positive amount,consuming one more apple will cause

Accepted Answer

A) total utility to decrease. 
B) a consumer to get no satisfaction from consuming apples. 
C) a consumer's total utility to increase. 
D) a consumer to go beyond her optimal consumption of apples. 
A) total utility to decrease. 
B) a consumer to get no satisfaction from consuming apples. 
C) a consumer's total utility to increase. 
D) a consumer to go beyond her optimal consumption of apples.

Question 18

Economists assume that the goal of consumers is to

Accepted Answer

A) do as little work as possible to survive. 
B) make themselves as well off as possible. 
C) spend all their income. 
D) consume as much as possible. 
A) do as little work as possible to survive. 
B) make themselves as well off as possible. 
C) spend all their income. 
D) consume as much as possible.

Question 19

Along a downward-sloping linear demand curve

Accepted Answer

A) the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase. 
B) the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities remain constant. 
C) the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases. 
D) the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remain constant. 
A) the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase. 
B) the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities remain constant. 
C) the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases. 
D) the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remain constant.

Question 20

Which of the following statements is false?

Accepted Answer

A) There is an indifference curve associated with any combination of goods selected by a consumer. 
B) A consumer is indifferent among all consumption bundles along a given budget line. 
C) All consumption bundles along a given indifference curve are equally desirable. 
D) Consumption bundles that lie on higher indifference curves yield higher utility. 
A) There is an indifference curve associated with any combination of goods selected by a consumer. 
B) A consumer is indifferent among all consumption bundles along a given budget line. 
C) All consumption bundles along a given indifference curve are equally desirable. 
D) Consumption bundles that lie on higher indifference curves yield higher utility.

Exam 10: Consumer Choice and Behavioral Economics

When the price of summer tank tops falls and you buy more of them because they are relatively less expensive,this is called

A network externality refers to a situation in which the usefulness of a product decreases with the number of consumers who use it.

The observation that people tend to value something more highly when they own it than when they don't is called the

The demand curve for corn is downward sloping.If the price of corn,an inferior good,falls,then

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed,Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

A study discussed in the Making the Connection feature in the text found that there is ________ that some consumers are not well aware of prices,even for goods they buy regularly.

Figure 10-1 -Refer to Figure 10-1.Which of the following statements is true?

An increase in income results in an outward shift of an indifference curve.

The income effect of a decrease in the price of legal services,a normal good,results in

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.Which diagram demonstrates an increase in total utility following a decrease in the price of popcorn?

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 income is shown in

The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

If marginal utility of apples is diminishing and is a positive amount,consuming one more apple will cause

Economists assume that the goal of consumers is to

Along a downward-sloping linear demand curve

Which of the following statements is false?

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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