Question 1

A network externality occurs when

Accepted Answer

A)  there is production cost savings from being networked with suppliers.
B)  there is production cost savings from being networked with buyers.
C)  the usefulness of a good is affected by how many other people use the good.
D)  the usefulness of a good is affected by celebrities who use the good.E) None of the above
F) B) and D)

Question 2

Total utility is constant along a given indifference curve.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements describes economists' attitudes regarding the influence of social factors on the choices consumers make?

Accepted Answer

A)  Economists formerly believed they were very important but now they believe they are not important.
B)  Economists believe social factors affect consumer choice in markets for public goods but not in markets for private goods.
C)  Liberal economists believe social factors are very important;conservative economists do not believe social factors have any influence on consumers.
D)  Economists traditionally believed they were unimportant,but many economists now believe social factors are important.E) A) and B)
F) A) and C)

Question 4

Suppose the consumer's income increases while the prices of the goods remain constant.Then the

Accepted Answer

A)  budget constraint shifts inward parallel to the original budget constraint.
B)  budget constraint shifts outward parallel to the original budget constraint.
C)  indifference curves shift outward away from the origin.
D)  indifference curves become flatter.E) B) and D)
F) C) and D)

Question 5

Quantity of  Soup (cups)   Total Utility  Quantity of  Sandwiches  Total Utility 1401452602753723102482412058851356906145\begin{array} { | c | c | c | c | } \hline \begin{array} { c } 	ext { Quantity of } \	ext { Soup (cups)  }\end{array} & 	ext { Total Utility } & \begin{array} { c } 	ext { Quantity of } \	ext { Sandwiches }\end{array} & 	ext { Total Utility } \\hline 1 & 40 & 1 & 45 \\hline 2 & 60 & 2 & 75 \\hline 3 & 72 & 3 & 102 \\hline 4 & 82 & 4 & 120 \\hline 5 & 88 & 5 & 135 \\hline 6 & 90 & 6 & 145 \\hline\end{array} Quantity of  Soup (cups)  ​123456​ Total Utility 406072828890​ Quantity of  Sandwiches ​123456​ Total Utility 4575102120135145​​  Table 10-2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods.
-Refer to Table 10-2.Holding prices constant,when Keira's income changed from $18 to $23,her utility maximizing bundle changed.Based on your answers to her optimal choices at the two income levels,what type of goods are soup and sandwiches?

Accepted Answer

A)  Soup is an inferior good and sandwiches are a normal good.
B)  Soup is a normal good and sandwiches are an inferior good.
C)  Both soup and sandwiches are normal goods.
D)  Both soup and sandwiches are inferior goods. E) B) and D)
F) A) and C)

Question 6

The demand curve for a Giffen good is

Accepted Answer

A)  non-linear but downward sloping.
B)  vertical.
C)  upward sloping.
D)  non-existent.E) A) and C)
F) A) and B)

Question 7

Figure 10-8 
-Refer to Figure 10-8.If the price of biscotti is $1.50 and the price of a cappuccino is $3.00,what is the slope of the budget constraint?

Accepted Answer

A)  -2
B)  -(3.00 - 1.50) /(3.00 + 1.50) = -1/3
C)  -1/2
D)  The slope cannot be determined without the value of income.E) B) and D)
F) A) and B)

Question 8

Terence has $50 per week to spend on Subway sandwiches and milkshakes.The price of a Subway sandwich is $5 and the price of a milkshake is $4.He buys 6 sandwiches and 5 milkshakes.The marginal utility of the 6th sandwich = 25 and the marginal utility of the 5th milkshake = 24.Which of the following is true?

Accepted Answer

A)  He is not maximizing his utility and should buy more milkshakes.
B)  He is maximizing his utility.
C)  He is not maximizing his utility and should buy more Subway sandwiches.
D)  He is not maximizing his utility because he is not spending all of his income.E) A) and B)
F) A) and C)

Question 9

Figure 10-1 
-Refer to Figure 10-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q1 to Q0.This change in quantity demanded is due to

Accepted Answer

A)  the price and output effects.
B)  the income and substitution effects.
C)  the fact that marginal willingness to pay falls.
D)  the law of diminishing marginal utility.E) All of the above
F) B) and D)

Question 10

Marginal utility can be

Accepted Answer

A)  negative.
B)  zero.
C)  positive.
D)  positive,negative,or zero.E) C) and D)
F) None of the above

Question 11

Article Summary
The use of celebrities to endorse products remains a popular way for many companies to attract customers and keep their products relevant to their customers.The article discusses five factors that must be examined by a company when choosing a celebrity to endorse its product:
1.The cost of a superstar versus the value of a rising star
2.Finding a good fit between the celebrity and the image of the brand
3.Choosing someone who will promote the brand
4.Identifying valid metrics to measure success
5.The future appeal of the celebrity
Carefully chosen celebrity endorsements have proven to influence customers and enhance a brand's reputation,but as the list indicates,not all celebrities are the right fit for all products.
-Refer to the Article Summary.One explanation for the increase in product sales because of celebrity endorsements is that people seem to receive ________ from goods they believe are popular.

Accepted Answer

A)  more utility
B)  diminishing utility
C)  greater network externalities
D)  increased path dependencyE) B) and C)
F) C) and D)

Question 12

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

Question 13

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

Accepted Answer

A) True 
 B)False

Question 14

Maurice Allais,Reinhard Selten,and Vernon Smith all were awarded the Nobel Prize in Economics in part because

Accepted Answer

A)  of their work with experimental economics.
B)  they discovered the first example of a Giffen good.
C)  of their work on the substitution and income effects of price changes.
D)  they proved that external economies would lead to market failure.E) All of the above
F) C) and D)

Question 15

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

Accepted Answer

The good must be an ...

Question 16

If by purchasing more apples and fewer oranges you increase your total utility,then apples must be cheaper than oranges.

Accepted Answer

A) True 
 B)False

Question 17

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 candy only is shown in

Accepted Answer

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

Question 18

Sunk costs

Accepted Answer

A)  are costs associated with repairing something you already own.
B)  are important for optimal decision making.
C)  are costs that have already been paid and cannot be recaptured in any significant way.
D)  are costs that firms sink into marketing.E) A) and B)
F) A) and D)

Question 19

Wilbur Rickhiser,a financial advisor,recently told one of his clients: "The biggest mistake you can make is to hold onto a stock for too long in order to avoid a loss.Let's say you bought a stock for $50 per share but that six months later the price fell to $40 after a poor earnings report.Many of my clients in this situation will hold the stock,hoping the price will later rise above $50.In most cases like this the price does not rise and may even fall.You must know when to cut your losses." Which of the following is the best explanation for Rickhiser's advice?

Accepted Answer

A)  People sometimes buy stocks because other people are buying them or they want to appear to be fashionable.
B)  People sometimes make mistakes when they buy stocks because of the endowment effect.
C)  People sometimes make mistakes when they buy stocks or when they buy goods and services: they ignore the monetary opportunity costs of their choices.
D)  People often fail to ignore the sunk costs of their decisions.The cost of the stock bought at $50 per share is a sunk cost.E) A) and B)
F) All of the above

Question 20

Figure 10-4 
-Refer to Figure 10-4.What is the marginal rate of substitution for one bar of chocolate between h and j?

Accepted Answer

A)    18\frac { 1 } { 8 }81​  of a cookie.
B)    14\frac { 1 } { 4 }41​  of a cookie.
C)  2 cookies.
D)  4 cookies. E) C) and D)
F) None of the above

Exam 10: Consumer Choice and Behavioral Economics

If by purchasing more apples and fewer oranges you increase your total utility,then apples must be cheaper than oranges.

Correct Answer
verified

Correct Answer
verified

Marginal utility can be

Correct Answer
verified

Suppose the consumer's income increases while the prices of the goods remain constant.Then the

Correct Answer
verified

Total utility is constant along a given indifference curve.

Correct Answer
verified

Correct Answer
verified

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

Correct Answer
verified
The good must be an ...
View Answer

Which of the following statements describes economists' attitudes regarding the influence of social factors on the choices consumers make?

Correct Answer
verified

Maurice Allais,Reinhard Selten,and Vernon Smith all were awarded the Nobel Prize in Economics in part because

Correct Answer
verified

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

Correct Answer
verified

A network externality occurs when

Correct Answer
verified

Correct Answer
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Figure 10-1 -Refer to Figure 10-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q1 to Q0.This change in quantity demanded is due to

Correct Answer
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Correct Answer
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A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

Correct Answer
verified

Figure 10-8 -Refer to Figure 10-8.If the price of biscotti is $1.50 and the price of a cappuccino is $3.00,what is the slope of the budget constraint?

Correct Answer
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Sunk costs

Correct Answer
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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 candy only is shown in

Correct Answer
verified

The demand curve for a Giffen good is

Correct Answer
verified

Exam 10: Consumer Choice and Behavioral Economics

If by purchasing more apples and fewer oranges you increase your total utility,then apples must be cheaper than oranges.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Marginal utility can be

Correct AnswerverifiedShow Answer

Suppose the consumer's income increases while the prices of the goods remain constant.Then the

Correct AnswerverifiedShow Answer

Total utility is constant along a given indifference curve.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

Correct AnswerverifiedThe good must be an ...View AnswerShow Answer

Which of the following statements describes economists' attitudes regarding the influence of social factors on the choices consumers make?

Correct AnswerverifiedShow Answer

Maurice Allais,Reinhard Selten,and Vernon Smith all were awarded the Nobel Prize in Economics in part because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A network externality occurs when

Correct AnswerverifiedShow Answer

Figure 10-4 -Refer to Figure 10-4.What is the marginal rate of substitution for one bar of chocolate between h and j?

Correct AnswerverifiedShow Answer

Figure 10-1 -Refer to Figure 10-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q1 to Q0.This change in quantity demanded is due to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the highest point on his indifference curve.

Correct AnswerverifiedShow Answer

Figure 10-8 -Refer to Figure 10-8.If the price of biscotti is $1.50 and the price of a cappuccino is $3.00,what is the slope of the budget constraint?

Correct AnswerverifiedShow Answer

Sunk costs

Correct AnswerverifiedShow Answer

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 candy only is shown in

Correct AnswerverifiedShow Answer

The demand curve for a Giffen good is

Correct AnswerverifiedShow Answer

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The good must be an ...
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