Question 1

For a demand curve to be upward sloping,the good would have to be an inferior good,and

Accepted Answer

A)  the income effect would have to be larger than the substitution effect.
B)  the income effect would have to be smaller than the substitution effect.
C)  the income effect would have to be equal to the substitution effect.
D)  the income effect and the substitution effect would have to be nonexistent.E) All of the above
F) B) and C)

Question 2

Figure 10-5 
-Refer to Figure 10-5.Consider the budget constraint BC1.If the price of DVDs is $20 and the price of CDs is $10,what is the consumer's income?

Accepted Answer

A)  $120
B)  $240
C)  $360
D)  $480E) A) and D)
F) B) and C)

Question 3

Figure 10-2 
-Refer to Figure 10-2.Best friends Laurel and Hardy both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

Accepted Answer

A)  They have identical movie preferences.
B)  Hardy enjoys romantic comedies more than Laurel.
C)  Hardy enjoys science fiction movies more than Laurel.
D)  The diagrams do not provide any information about relative preferences.E) A) and B)
F) A) and C)

Question 4

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 5

Assume that Anne has $300 to spend on DVDs and CDs.Her optimal consumption of DVDs and CDs is illustrated by a tangency between a budget line and an indifference curve.Now assume that the price of CDs rises but the price of DVDs falls.How can you show that Anne is made better off by these price changes?

Accepted Answer

A)  Show that the price changes shift Anne's budget line outward; the budget line is tangent to a higher indifference curve.
B)  Show that the price changes move Anne along her budget line to a higher indifference curve.
C)  Show that Anne can afford to buy the optimal combination of DVDs and CDs at their original prices; then show that Anne can now reach a higher indifference curve.
D)  Show that Anne can now afford to buy more DVDs,which give her greater utility than CDs.E) A) and B)
F) A) and C)

Question 6

You participate in a taste test for a new protein supplement called "Boost." You are given five consecutive one ounce vials of the supplement and after consuming each vial you are asked to note your reaction.You consume the first vial and your response is: "Hmmm,quite good!" After the second,you say,"Not bad at all." After the third,you note,"It's alright." and after the fourth you wince,"No more,the after-taste is getting to me.I need water." What economic principle does this scenario illustrate? Define the principle.

Accepted Answer

It illustrates the law of diminishing ma...

Question 7

A consumer's budget constraint is

Accepted Answer

A)  the limited income that a consumer has to spend on goods and services.
B)  the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market.
C)  the price ratio a consumer faces in the marketplace.
D)  the extent to which one's preferences are limited by one's income.E) A) and B)
F) B) and C)

Question 8

Which of the following is not a reason why companies such as Under Armour and Movado pay Tom Brady to endorse their products?

Accepted Answer

A)  Many consumers feel more fashionable if they use the same products that Tom Brady uses.
B)  Some consumers will buy a product endorsed by Tom Brady because they believe he is particularly knowledgeable about the product.
C)  Some consumers want to feel closer to a celebrity who endorses a product.
D)  Some consumers believe that Tom Brady is more rational than the average consumer.E) A) and B)
F) B) and C)

Question 9

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

Accepted Answer

A)  contentment.
B)  psychic income.
C)  wealth.
D)  utility.E) None of the above
F) All of the above

Question 10

A curve that shows combinations of consumption bundles that give a consumer the same utility is called

Accepted Answer

A)  a utility curve.
B)  an indifference curve.
C)  a preference curve.
D)  a demand curve.E) All of the above
F) A) and C)

Question 11

The economic model of consumer behavior predicts that

Accepted Answer

A)  consumers will try to earn as much income as they can over their lifetimes.
B)  consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy.
C)  consumers will try to accumulate as many goods and services as they can before they die.
D)  consumers divide their time between consumption and leisure activities in order to maximize social welfare.E) A) and B)
F) None of the above

Question 12

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

Accepted Answer

A) True 
 B)False

Question 13

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 externalitiesE) A) and C)
F) A) and D)

Question 14

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

Accepted Answer

A)  behavioral economics.
B)  irrational economics.
C)  social economics.
D)  new wave economics.E) B) and D)
F) B) and C)

Question 15

Suppose Barry is maximizing his utility from consuming used paperback novels and audio books.The price of a used novel = $4 and the price of an audio book = $8.If the marginal utility of the last novel was 32 units of utility (utils) what was the marginal utility of the last audio book purchased?

Accepted Answer

A)  2 utils
B)  12 utils
C)  16 utils
D)  64 utilsE) B) and C)
F) A) and C)

Question 16

Table 10-4
 
-Refer to Table 10-4,which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos.Assume that the price of the sub sandwiches is $4 and the price of tacos is $2.When Harry's income is $14 he buys two Italian sub sandwiches and three tacos.The last column lists the values of the marginal utility per dollar for tacos when the price of tacos decreases to $1.Complete this statement: As a result of the change in price,the marginal utility of each taco Harry consumes increases and

Accepted Answer

A)  the substitution effect of the price change will cause Harry to buy more tacos and fewer subs.
B)  the substitution effect of the price change will cause Harry to buy more tacos if they are a normal good,and fewer tacos if they are an inferior good.
C)  the substitution effect will cause Harry to buy another sub because his purchasing power has increased.
D)  the substitution effect will cause Harry to buy fewer tacos.E) B) and D)
F) None of the above

Question 17

In an experiment that employed the dictator game,economists at Cornell University gave student "allocators" the option of dividing $20 in only two ways (a) $18 for themselves and $2 to another student,or (b) $10 for themselves and $10 to another student.What was one result from this experiment?

Accepted Answer

A)  Most allocators chose to give themselves $18 and $2 to the other students.
B)  Most of the students who were not allocators did not like having someone else make decisions for them.
C)  A majority of the female allocators chose option (a) ; a majority of the male allocators chose option (b) .
D)  Most of the allocators apparently valued acting fairly.E) B) and C)
F) A) and D)

Question 18

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 yearsE) B) and C)
F) A) and B)

Question 19

Figure 10-5 
-Refer to Figure 10-5.If the consumer has $240 to spend on DVDs and CDs,what is the price of a DVD if the budget constraint is BC1?

Accepted Answer

A)  $10
B)  $20
C)  $24
D)  $40E) A) and D)
F) A) and C)

Question 20

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.E) A) and C)
F) A) and B)

Exam 10: Consumer Choice and Behavioral Economics

What is the endowment effect?

Correct Answer
verified

Figure 10-5 -Refer to Figure 10-5.If the consumer has $240 to spend on DVDs and CDs,what is the price of a DVD if the budget constraint is BC1?

Correct Answer
verified

We can derive the market demand curve for gold earrings

Correct Answer
verified

A consumer's budget constraint is

Correct Answer
verified

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

Correct Answer
verified

Suppose Barry is maximizing his utility from consuming used paperback novels and audio books.The price of a used novel = $4 and the price of an audio book = $8.If the marginal utility of the last novel was 32 units of utility (utils) what was the marginal utility of the last audio book purchased?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
It illustrates the law of diminishing ma...
View Answer

In an experiment that employed the dictator game,economists at Cornell University gave student "allocators" the option of dividing $20 in only two ways (a) $18 for themselves and $2 to another student,or (b) $10 for themselves and $10 to another student.What was one result from this experiment?

Correct Answer
verified

Figure 10-2 -Refer to Figure 10-2.Best friends Laurel and Hardy both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

Correct Answer
verified

The economic model of consumer behavior predicts that

Correct Answer
verified

Correct Answer
verified

Which of the following is not a reason why companies such as Under Armour and Movado pay Tom Brady to endorse their products?

Correct Answer
verified

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

Correct Answer
verified

A curve that shows combinations of consumption bundles that give a consumer the same utility is called

Correct Answer
verified

Figure 10-5 -Refer to Figure 10-5.Consider the budget constraint BC1.If the price of DVDs is $20 and the price of CDs is $10,what is the consumer's income?

Correct Answer
verified

Correct Answer
verified

For a demand curve to be upward sloping,the good would have to be an inferior good,and

Correct Answer
verified

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?

Correct Answer
verified
If the firm chooses to raise prices,cons...
View Answer

Exam 10: Consumer Choice and Behavioral Economics

What is the endowment effect?

Correct AnswerverifiedShow Answer

Figure 10-5 -Refer to Figure 10-5.If the consumer has $240 to spend on DVDs and CDs,what is the price of a DVD if the budget constraint is BC1?

Correct AnswerverifiedShow Answer

We can derive the market demand curve for gold earrings

Correct AnswerverifiedShow Answer

A consumer's budget constraint is

Correct AnswerverifiedShow Answer

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

Correct AnswerverifiedShow Answer

Suppose Barry is maximizing his utility from consuming used paperback novels and audio books.The price of a used novel = $4 and the price of an audio book = $8.If the marginal utility of the last novel was 32 units of utility (utils) what was the marginal utility of the last audio book purchased?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIt illustrates the law of diminishing ma...View AnswerShow Answer

In an experiment that employed the dictator game,economists at Cornell University gave student "allocators" the option of dividing $20 in only two ways (a) $18 for themselves and $2 to another student,or (b) $10 for themselves and $10 to another student.What was one result from this experiment?

Correct AnswerverifiedShow Answer

Figure 10-2 -Refer to Figure 10-2.Best friends Laurel and Hardy both enjoy watching romantic comedies and science fiction movies.Based on the diagrams above what can you conclude about their movie preferences?

Correct AnswerverifiedShow Answer

The economic model of consumer behavior predicts that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not a reason why companies such as Under Armour and Movado pay Tom Brady to endorse their products?

Correct AnswerverifiedShow Answer

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

Correct AnswerverifiedShow Answer

A curve that shows combinations of consumption bundles that give a consumer the same utility is called

Correct AnswerverifiedShow Answer

Figure 10-5 -Refer to Figure 10-5.Consider the budget constraint BC1.If the price of DVDs is $20 and the price of CDs is $10,what is the consumer's income?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For a demand curve to be upward sloping,the good would have to be an inferior good,and

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedIf the firm chooses to raise prices,cons...View AnswerShow Answer

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Correct Answer
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Correct Answer
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verified
It illustrates the law of diminishing ma...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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If the firm chooses to raise prices,cons...
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