Exam 7: Consumer Choice: Maximizing Utility and Behavioral Economics

Given the choice between a sure-thing option and a gamble option with the same expected payoff, a____________ person will choose gamble.

Exhibit 20-1 Refer to Exhibit 20-1. In this example, marginal utility

Research conducted by Nicholas Epley and his colleagues at Harvard showed that people will spend a _________________ percentage of money given to them if it is  ________________ rather than

Marginal utility is always a positive number.

If, as a person consumes additional units of a good, total utility rises by a constant amount, it follows that

Jack receives 30 utils from one apple, 45 utils from two apples, and 55 utils from three apples. It follows that the marginal utility of the third apple is __________ utils and that Jack's __________utility rises as his __________ declines.

Explain how the conditions for consumer equilibrium help to support the law of demand. Give an example to support your answer.

Exhibit 20-4 Refer to Exhibit 20-4.  What value goes in blank (C)?

If a person's income falls, his or her budget constraint moves

The endowment effect

Jones buys two goods, A and B. Currently, Jones receives marginal utility of 24 utils from good A and pays a price of $1.50 per unit. Jones receives a marginal utility of 43 utils from good B and pays a price of $1.99 per unit. Jones receives __________ per dollar from good B as he does from good A.

The budget constraint cuts the horizontal axis at 12 units of good X and it cuts the vertical axis at 20 units of good Y. If the price of good X is $20 and the price of good Y is $12, then what does income equal?

It is possible for total utility to rise as marginal utility falls.

Exhibit 20-2 Refer to Exhibit 20-2. Total utility for the first four oranges is

Economists assume that the goal of consumers is to maximize marginal utility.

Marginal utility

To resolve the diamond-water paradox, it is important to note that under most circumstances,

As presented in the textbookbook, research by some economists has shown that even when there is no difference between options provided to people

Joe is currently in consumer equilibrium by consuming cheese and crackers, such that the last cracker consumed yielded 8 utils and the last piece of cheese consumed yielded 12 utils. Assume the price of crackers is two cents per cracker and the price of cheese is three cents per piece. If the price of crackers increases to four cents, Joe should __________ his consumption of crackers and his marginal utility from crackers will __________ and also __________ his consumption of cheese and his marginal utility from cheese will __________.

An indifference curve shows