Question 1

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.E) A) and B)
F) All of the above

Question 2

The demand curve for canned peas is downward sloping.If the price of canned peas, an inferior good, rises, then

Accepted Answer

A)  the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded.
B)  the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in quantity demanded.
C)  both the income and substitution effects reinforce each other to decrease the quantity demanded.
D)  the income and substitution effects offset each other but the price effect of an inferior good leads you to buy more canned peas.E) None of the above
F) B) and C)

Question 3

A sunk cost is a cost that has already been paid and cannot be recovered.

Accepted Answer

A) True 
 B)False

Question 4

Consider a downward-sloping demand curve.When the price of an inferior good decreases, the income and substitution effects

Accepted Answer

A)  work in the same direction to increase quantity demanded.
B)  work in the same direction to decrease quantity demanded.
C)  work in opposite directions and quantity demanded increases.
D)  work in opposite directions and quantity demanded decreases.E) B) and C)
F) None of the above C

Question 5

Figure 10-9
 
-Refer to Figure 10-9.The change in the budget constraint from BC₁ to BC₂ implies

Accepted Answer

A)  the prices of DVDs and CDs have increased.
B)  income and the prices of DVDs and CDs have increased.
C)  the price of DVDs has increased and the price of CDs has decreased.
D)  the price of DVDs has decreased and the price of CDs has increased.E) None of the above
F) B) and C) C

Question 6

The income effect of a price increase causes a decrease in the quantity of a normal good demanded.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

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 C)
F) B) and C) D

Question 9

Harvey Miller owns a baseball that was hit for a home run by Ted Williams.Harvey, a long-time Boston Red Sox fan, recently refused to sell his baseball for $75,000 even though he would not have paid someone more than $10,000 for the baseball if he did not already own it.Harvey explained his decision not to sell the baseball by noting that: "Ted Williams was my hero.This baseball has a great deal of sentimental value for me." Which of the following can explain Harvey's behavior?

Accepted Answer

A)  the difference between implicit and explicit costs
B)  the scarcity of home run baseballs hit by Ted Williams
C)  the endowment effect
D)  how social influences can affect consumption choicesE) A) and D)
F) B) and C)

Question 10

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) None of the above
F) B) and D)

Question 11

The substitution effect of an increase in the price of Raisin Bran refers to

Accepted Answer

A)  the decrease in the demand for Raisin Bran when its price rises.
B)  the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left.
C)  the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant.
D)  the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, causes consumers to buy less Raisin Bran.E) None of the above
F) C) and D)

Question 12

Economists Gary Becker and Kevin Murphy are associated with which of the following?

Accepted Answer

A)  They discovered the first example of a Giffen good.
B)  They have argued that social factors are not important in explaining the choices consumers make.
C)  Consumers appear to receive utility from consuming goods they believe are popular.
D)  They discovered that price changes have both income and substitution effects.E) A) and B)
F) None of the above

Question 13

The order of the letters along the rows of computer keyboards could be changed to allow users to type faster, but this would inconvenience the vast majority of people who learned to type with the current keyboard layout.The costs of switching to a new layout make this change unlikely.This is an example of

Accepted Answer

A)  path dependency.
B)  how social influences overwhelm the substitution effect of a price change.
C)  how the elasticity of demand for typewriters has been affected by externalities.
D)  how consumers sometimes do not behave rationally.E) A) and D)
F) A) and C)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

1.Consumers may believe that the celebri...

Question 16

In order to derive an individual's demand curve for salmon, we would observe what happens to the utility-maximizing bundle when we change

Accepted Answer

A)  income and hold everything else constant.
B)  tastes and preferences and hold everything else constant.
C)  the price of the product and hold everything else constant.
D)  the price of a close substitute and hold everything else constant.E) A) and B)
F) B) and D)

Question 17

Some economists have suggested that network externalities result in consumers being locked into the use of products with inferior technologies.Economists Stan Leibowitz and Stephen Margolis have studied cases that have been cited as examples of this and found

Accepted Answer

A)  there is no convincing evidence that the alternative technologies were superior.
B)  consumers sometimes do become locked into the use of products with inferior technologies.
C)  that in all of these cases network externalities resulted in market failure.
D)  that consumers use products with inferior technologies when their prices are lower than products with superior technologies.E) A) and B)
F) A) and C)

Question 18

Why do convex indifference curve have a negative slope?

Accepted Answer

A)  because consumers take market prices as given
B)  because consumers face a budget constraint
C)  because to keep utility constant, a consumer must get more of one good if she is to give up some of the other
D)  because scarcity implies that it is not possible to consume more of one good without giving up some of the otherE) B) and C)
F) A) and B)

Question 19

Consider the following hypothetical scenarios:
Scenario A: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.The sales attendant at the store tells you that the pair of jeans you wish to buy is on sale for $160 at another store, located about a 20-minute drive away.
Scenario B: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.The sales attendant at the store tells you that the t-shirt you wish to buy is on sale for $30 at another store, located about a 20-minute drive away.
Based on standard economic theory, under which scenario would you make the 20-minute trip to the other store?

Accepted Answer

A)  Scenario A because the pair of jeans is a very expensive item and $15 saving is quite substantial
B)  Scenario B because a $15 saving amounts to a substantial discount (about 33 percent) 
C)  in either scenario if I think a $15 savings is worth the 20-minute trip
D)  in none of these scenarios if I think the $15 saving is not worth the 20-minute trip
E)  C and D are correct answers.F) A) and B)
G) B) and E)

Question 20

The substitution effect of a change in the price of cauliflower is the portion of the change in the quantity of cauliflower demanded that can be attributed to the change in the price of a substitute vegetable such as asparagus.

Accepted Answer

A) True 
 B)False

Exam 10: Consumer Choice and Behavioral Economics

The income effect of an increase in the price of salmon

Correct Answer
verified

The demand curve for canned peas is downward sloping.If the price of canned peas, an inferior good, rises, then

Correct Answer
verified

A sunk cost is a cost that has already been paid and cannot be recovered.

Correct Answer
verified

Consider a downward-sloping demand curve.When the price of an inferior good decreases, the income and substitution effects

Correct Answer
verified
C

Figure 10-9 -Refer to Figure 10-9.The change in the budget constraint from BC₁ to BC₂ implies

Correct Answer
verified
C

The income effect of a price increase causes a decrease in the quantity of a normal good demanded.

Correct Answer
verified

Along a downward-sloping linear demand curve

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

Correct Answer
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D

Correct Answer
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The substitution effect of an increase in the price of Raisin Bran refers to

Correct Answer
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Economists Gary Becker and Kevin Murphy are associated with which of the following?

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

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

Correct Answer
verified
1.Consumers may believe that the celebri...
View Answer

In order to derive an individual's demand curve for salmon, we would observe what happens to the utility-maximizing bundle when we change

Correct Answer
verified

Some economists have suggested that network externalities result in consumers being locked into the use of products with inferior technologies.Economists Stan Leibowitz and Stephen Margolis have studied cases that have been cited as examples of this and found

Correct Answer
verified

Why do convex indifference curve have a negative slope?

Correct Answer
verified

Correct Answer
verified

The substitution effect of a change in the price of cauliflower is the portion of the change in the quantity of cauliflower demanded that can be attributed to the change in the price of a substitute vegetable such as asparagus.

Correct Answer
verified

Exam 10: Consumer Choice and Behavioral Economics

The income effect of an increase in the price of salmon

Correct AnswerverifiedShow Answer

The demand curve for canned peas is downward sloping.If the price of canned peas, an inferior good, rises, then

Correct AnswerverifiedShow Answer

A sunk cost is a cost that has already been paid and cannot be recovered.

Correct AnswerverifiedShow Answer

Consider a downward-sloping demand curve.When the price of an inferior good decreases, the income and substitution effects

Correct AnswerverifiedC

Figure 10-9 -Refer to Figure 10-9.The change in the budget constraint from BC₁ to BC₂ implies

Correct AnswerverifiedC

The income effect of a price increase causes a decrease in the quantity of a normal good demanded.

Correct AnswerverifiedShow Answer

Along a downward-sloping linear demand curve

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedD

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The substitution effect of an increase in the price of Raisin Bran refers to

Correct AnswerverifiedShow Answer

Economists Gary Becker and Kevin Murphy are associated with which of the following?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct Answerverified1.Consumers may believe that the celebri...View AnswerShow Answer

In order to derive an individual's demand curve for salmon, we would observe what happens to the utility-maximizing bundle when we change

Correct AnswerverifiedShow Answer

Some economists have suggested that network externalities result in consumers being locked into the use of products with inferior technologies.Economists Stan Leibowitz and Stephen Margolis have studied cases that have been cited as examples of this and found

Correct AnswerverifiedShow Answer

Why do convex indifference curve have a negative slope?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The substitution effect of a change in the price of cauliflower is the portion of the change in the quantity of cauliflower demanded that can be attributed to the change in the price of a substitute vegetable such as asparagus.

Correct AnswerverifiedShow Answer

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C

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C

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D

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1.Consumers may believe that the celebri...
View Answer

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