Question 1

Economists have shown that when the ultimatum game experiment is carried out,both allocators and recipients act as if fairness is important.

Accepted Answer

A) True 
 B)False

Question 2

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.

Question 3

Suppose at the current price,the demand for copper is estimated at -3.14.What happens to sales revenue if the government imposes a price ceiling below the free market equilibrium price in the copper market?

Accepted Answer

A) Sales revenue falls. 
B) Sales revenue rises. 
C) Sales revenue remains unchanged because copper is a necessity for most industries. 
D) It cannot be determined without information on prices.

Question 4

Necessities tend to have more inelastic demands than luxuries.

Accepted Answer

A) True 
 B)False

Question 5

We can derive the market demand curve for gold earrings

Accepted Answer

A) only if the tastes of all gold earring consumers are similar. 
B) by adding horizontally the individual demand curves of each gold earring consumer. 
C) by adding vertically the quantity demanded of each gold earring consumed at each price. 
D) by adding the prices each gold earring consumer is willing to pay for each quantity.

Question 6

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 7

Economist Jerry Hausman estimated the price elasticity of demand for "Post Raisin Bran" and "All types of breakfast cereals." He found that the price elasticity of demand for Post Raisin Bran was -2.5 and the price elasticity of demand for "All types of breakfast cereals" was -0.9.Which of the following can be implied from Hausman's estimates?

Accepted Answer

A) The demand for "All types of breakfast cereals" is elastic. 
B) A 1 percent increase in the price of Post Raisin Bran will lead to a 25 percent decrease in the quantity demanded of Post Raisin Bran. 
C) The demand for Post Raisin Bran is more elastic than the demand for "All types of breakfast cereals." 
D) A 1 percent decrease in the price of breakfast cereals will lead to a 2.5 percent increase in the quantity demanded of Post Raisin Bran.

Question 8

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.

Question 9

Which of the following statements is true?

Accepted Answer

A) In general, if a product has few substitutes it will have an elastic demand. 
B) The more time that passes the more inelastic the demand for a product becomes. 
C) The demand curve for a necessity is more elastic than the demand curve for a luxury. 
D) The more narrowly we define a market, the more elastic the demand for a product will be.

Question 10

Jamal,Lawson and Kyle have been standing in line for almost an hour waiting to be served at Kirala,a popular new Japanese restaurant.It is possible that some of the people in line won't be served at all before the restaurant closes.Which of the following could explain why the restaurant does not simply raise prices high enough to eliminate the lines?
a.In situations where consumption takes place publicly,demand for the product is also influenced by how many other people are buying the product.Consequently,a popular restaurant that increased its prices enough to eliminate lines might find that it had also eliminated its popularity.
b.Firms may sometimes not raise their prices for fear that it violates people's sense of fairness and might alienate customers.
c.The demand for restaurant meals is relatively elastic and if the firm raise prices it will lower its profits.

Accepted Answer

A) a only 
B) a and b only 
C) a and c only 
D) a, b, and c

Question 11

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

Question 12

List three reasons why demand for a product will often increase if the product is endorsed by a celebrity.

Accepted Answer

The answer of List three reasons why demand for a...

Question 13

If the demand for a life-saving drug was perfectly inelastic and the price doubled,the quantity demanded would

Accepted Answer

A) also double. 
B) decrease by 50%. 
C) be cut in half. 
D) remain constant.

Question 14

We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because

Accepted Answer

A) there has never been evidence of a perfectly inelastic demand curve. 
B) an inelastic demand curve may be perfectly inelastic at some times but not others. 
C) perfectly inelastic demand curves are rare. 
D) an inelastic demand curve may be elastic at high prices.

Question 15

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Days of Future Past.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.

Question 16

A good is path dependent when

Accepted Answer

A) consumers get utility from consuming goods that others are consuming, such as restaurants. 
B) the first technology that was adopted has an advantage over a better technology that came later. 
C) people who move location follow the path of people who moved before them. 
D) it can only be used in one way.

Question 17

Suppose Renee can increase her total utility from consuming video rentals and books by buying one more book and renting one fewer video.Which of the following is true?

Accepted Answer

A) The marginal utility of video rentals is negative. 
B) The marginal utility per dollar spent on books exceeds that of video rentals. 
C) The marginal utility of the last book consumed exceeds the marginal utility of the last video rental consumed. 
D) The marginal utility of the last video rental consumed exceeds the marginal utility of the last book consumed.

Question 18

In making decisions about what to consume,a person's goal is to

Accepted Answer

A) allocate her limited income among all the products she wishes to buy so that she receives the highest total utility. 
B) buy low-priced goods rather than high-priced goods. 
C) maximize her marginal utility from the goods and services she wishes to buy using her limited income. 
D) consume as many necessities as possible and then, if there is money left over, to buy luxuries.

Question 19

In general,a "big ticket item" such as a house or new car will

Accepted Answer

A) tend to have a more elastic demand than a lower priced good. 
B) tend to have an inelastic demand because spending on the item takes up a large share of the average consumer's budget. 
C) tend to have an inelastic demand because it has many substitutes. 
D) tend to have a more inelastic demand the more time that passes.

Question 20

Which of the following is used to explain why a consumer's willingness to buy Microsoft Office increases as the number of other people who use Microsoft Office increases?

Accepted Answer

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

Exam 7: Consumer Choice and Elasticity

Economists have shown that when the ultimatum game experiment is carried out,both allocators and recipients act as if fairness is important.

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?

Suppose at the current price,the demand for copper is estimated at -3.14.What happens to sales revenue if the government imposes a price ceiling below the free market equilibrium price in the copper market?

Necessities tend to have more inelastic demands than luxuries.

We can derive the market demand curve for gold earrings

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

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

Which of the following statements is true?

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?

List three reasons why demand for a product will often increase if the product is endorsed by a celebrity.

If the demand for a life-saving drug was perfectly inelastic and the price doubled,the quantity demanded would

We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because

Suppose you pre-ordered a non-refundable movie ticket to X-Men: Days of Future Past.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?

A good is path dependent when

Suppose Renee can increase her total utility from consuming video rentals and books by buying one more book and renting one fewer video.Which of the following is true?

In making decisions about what to consume,a person's goal is to

In general,a "big ticket item" such as a house or new car will

Which of the following is used to explain why a consumer's willingness to buy Microsoft Office increases as the number of other people who use Microsoft Office increases?