Question 1

Total utility

Accepted Answer

A) cannot decrease as a person consumes more and more of a good. 
B) has a constant rate of increase as a person consumes more and more of a good. 
C) is equal to the sum of the marginal utilities of all units consumed. 
D) is negative when marginal utility is declining. 
A) cannot decrease as a person consumes more and more of a good. 
B) has a constant rate of increase as a person consumes more and more of a good. 
C) is equal to the sum of the marginal utilities of all units consumed. 
D) is negative when marginal utility is declining.

Question 2

Firms pay famous individuals to endorse their products because

Accepted Answer

A) apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product. 
B) the firms are irrational and are wasting advertising expenditures. 
C) famous people obviously know what are the best goods and services. 
D) famous people only consume high quality products. 
A) apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product. 
B) the firms are irrational and are wasting advertising expenditures. 
C) famous people obviously know what are the best goods and services. 
D) famous people only consume high quality products.

Question 3

Some online penny auctions charge a fee,such as $1,for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

Accepted Answer

The $1 charge per bid should be consider

Question 4

What is the endowment effect?

Accepted Answer

A) the phenomenon that economic agents are endowed with different qualities and abilities so that trade among individuals increase efficiency 
B) the tendency for economic agents with abundant resources to consume a proportionately greater quantity of goods and services 
C) the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it. 
D) the tendency of firms to use celebrities endowed with good looks to promote their products 
A) the phenomenon that economic agents are endowed with different qualities and abilities so that trade among individuals increase efficiency 
B) the tendency for economic agents with abundant resources to consume a proportionately greater quantity of goods and services 
C) the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it. 
D) the tendency of firms to use celebrities endowed with good looks to promote their products

Question 5

Article Summary
Based on resale prices for tickets for the 2013 Super Bowl in New Orleans, face-value prices for the most expensive tickets to the 2014 game are expected to more than double, with significant price increases for lesser-valued tickets as well. Evidence indicates that sports teams are more interested in maximizing attendance instead of ticket revenue, since greater attendance means more spending on items such as parking and concessions. Higher ticket prices in secondary markets seem to verify that teams are charging less than they could be if their goal was to maximize ticket revenue.

-Refer to the Article Summary.The idea that sports teams could charge more for tickets and still increase revenue indicates that tickets are being priced in the ________ portion of their demand curve.

Accepted Answer

A) elastic 
B) inelastic 
C) unit elastic 
D) perfectly elastic 
A) elastic 
B) inelastic 
C) unit elastic 
D) perfectly elastic

Question 6

Which of the following is a common mistake consumers commit when they make decisions?

Accepted Answer

A) They take into account nonmonetary opportunity costs but ignore monetary costs. 
B) They are overly pessimistic about their future behavior. 
C) They fail to ignore sunk costs. 
D) They sometimes value fairness too much. 
A) They take into account nonmonetary opportunity costs but ignore monetary costs. 
B) They are overly pessimistic about their future behavior. 
C) They fail to ignore sunk costs. 
D) They sometimes value fairness too much.

Question 7

Table 7-4
 $$\begin{array} { | c | c | c | c | c | } 
\hline & \text { Steak \& Cheese } & \text { Steak \& Cheese } & \text { Grilled Chicken } & \text { Grilled Chicken } \
\hline \text { Quantity } & \boldsymbol { M U } & \boldsymbol { M U / \boldsymbol { P } } & \boldsymbol { M U } & \boldsymbol { M U / P } \
\hline 1 & 40 & 10 & 30 & 15 \
\hline 2 & 32 & 8 & 24 & 12 \
\hline 3 & 20 & 5 & 16 & 8 \
\hline 4 & 12 & 3 & 12 & 6 \
\hline 5 & 6 & 1.5 & 8 & 4 \
\hline 6 & 2 & 0.5 & 4 & 2 \
\hline
\end{array}$$
-Refer to Table 7-4.For steak and cheese and grilled chicken sandwiches,the table contains the values of the marginal utility (MU)and marginal utility per dollar (MU/P)for Mabel Jarvis.Mabel has $14 to spend on steak and cheese and grilled chicken sandwiches.Which of the following statements is false?

Accepted Answer

A) The price of steak and cheese sandwiches is $4.The price of grilled chicken sandwiches is $2. 
B) If Mabel maximizes her utility she will buy three grilled chicken sandwiches. 
C) If Mabel maximizes her utility she will buy two steak and cheese sandwiches. 
D) We do not have enough information to determine how many sandwiches Mabel will buy to maximize her utility. 
A) The price of steak and cheese sandwiches is $4.The price of grilled chicken sandwiches is $2. 
B) If Mabel maximizes her utility she will buy three grilled chicken sandwiches. 
C) If Mabel maximizes her utility she will buy two steak and cheese sandwiches. 
D) We do not have enough information to determine how many sandwiches Mabel will buy to maximize her utility.

Question 8

Economists assume that the goal of consumers is to

Accepted Answer

A) do as little work as possible to survive. 
B) make themselves as well off as possible. 
C) expend all their income. 
D) consume as much as possible. 
A) do as little work as possible to survive. 
B) make themselves as well off as possible. 
C) expend all their income. 
D) consume as much as possible.

Question 9

If demand for a product is perfectly inelastic a change in price will not change total revenue.

Accepted Answer

A) True 
 B)False

Question 10

Economist Jerry Hausman estimated the price elasticity of demand for breakfast cereal.He found that

Accepted Answer

A) the price elasticity for a particular brand of raisin bran was the same as the elasticity of demand for all family cereals. 
B) the price elasticity of demand for Post Raisin Bran is less than the price elasticity of demand for Kellogg's Raisin Bran. 
C) the price elasticity of all family breakfast cereals is greater than the price elasticity of demand for Post Raisin Bran or Kellogg's Raisin Bran. 
D) the price elasticity of demand for a particular brand of raisin bran was larger in absolute value than the elasticity for all family cereals. 
A) the price elasticity for a particular brand of raisin bran was the same as the elasticity of demand for all family cereals. 
B) the price elasticity of demand for Post Raisin Bran is less than the price elasticity of demand for Kellogg's Raisin Bran. 
C) the price elasticity of all family breakfast cereals is greater than the price elasticity of demand for Post Raisin Bran or Kellogg's Raisin Bran. 
D) the price elasticity of demand for a particular brand of raisin bran was larger in absolute value than the elasticity for all family cereals.

Question 11

Table 7-4
 $$\begin{array} { | c | c | c | c | c | } 
\hline & \text { Steak \& Cheese } & \text { Steak \& Cheese } & \text { Grilled Chicken } & \text { Grilled Chicken } \
\hline \text { Quantity } & \boldsymbol { M U } & \boldsymbol { M U / \boldsymbol { P } } & \boldsymbol { M U } & \boldsymbol { M U / P } \
\hline 1 & 40 & 10 & 30 & 15 \
\hline 2 & 32 & 8 & 24 & 12 \
\hline 3 & 20 & 5 & 16 & 8 \
\hline 4 & 12 & 3 & 12 & 6 \
\hline 5 & 6 & 1.5 & 8 & 4 \
\hline 6 & 2 & 0.5 & 4 & 2 \
\hline
\end{array}$$
-Refer to Table 7-4.For steak and cheese and grilled chicken sandwiches,the table contains the values of the marginal utility (MU)and marginal utility per dollar (MU/P)for Mabel Jarvis.Mabel has $14 to spend on steak and cheese and grilled chicken sandwiches.Which of the following statements is true?

Accepted Answer

A) If Mabel maximizes her utility she will buy three steak and cheese sandwiches and two grilled chicken sandwiches. 
B) If Mabel was maximizing her utility when spending $14 and then received an additional $4, she would receive the most marginal utility per dollar if her next purchase was another grilled chicken sandwich. 
C) Mabel will first buy two steak and cheese sandwiches; then with her remaining $6 she will buy three grilled chicken sandwiches. 
D) To maximize her utility, Mabel will need a total of $36, the income needed to buy 6 steak and cheese sandwiches and 6 grilled chicken sandwiches. 
A) If Mabel maximizes her utility she will buy three steak and cheese sandwiches and two grilled chicken sandwiches. 
B) If Mabel was maximizing her utility when spending $14 and then received an additional $4, she would receive the most marginal utility per dollar if her next purchase was another grilled chicken sandwich. 
C) Mabel will first buy two steak and cheese sandwiches; then with her remaining $6 she will buy three grilled chicken sandwiches. 
D) To maximize her utility, Mabel will need a total of $36, the income needed to buy 6 steak and cheese sandwiches and 6 grilled chicken sandwiches.

Question 12

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 others use the good. 
D) the usefulness of a good is affected by celebrities who use the good. 
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 others use the good. 
D) the usefulness of a good is affected by celebrities who use the good.

Question 13

A construction project in Congressman Foghorn's district is unfinished.Foghorn has asked that a new appropriations bill include funds to complete the project,despite a report by an independent agency that the project is a waste of taxpayer money.Foghorn's project is a bridge that crosses a river between two cities in his district.The press has criticized Foghorn and dubbed the project "a bridge too far" since another bridge,located closer to the same two cities Foghorn's bridge will connect,already exists and can accommodate all traffic between the two cities.Foghorn argues that if the bridge project is not completed,the $50 million already spent will have been wasted.Is Foghorn's argument economically rational? Explain your answer.

Accepted Answer

Foghorn's argument is not rational.The $

Question 14

Figure 7-9
  
-Refer to Figure 7-9.Between points a and b on the demand curve,demand is

Accepted Answer

A) perfectly inelastic. 
B) unit-elastic. 
C) perfectly elastic. 
D) elastic. 
A) perfectly inelastic. 
B) unit-elastic. 
C) perfectly elastic. 
D) elastic.

Question 15

Total revenue is equal to

Accepted Answer

A) the amount of funds earned by a firm minus its costs of production. 
B) the total quantity sold of a product over a given period of time. 
C) the price of a product multiplied by the number of units of the product sold. 
D) the monetary value of the capital (for example, plant and equipment)a firm owns. 
A) the amount of funds earned by a firm minus its costs of production. 
B) the total quantity sold of a product over a given period of time. 
C) the price of a product multiplied by the number of units of the product sold. 
D) the monetary value of the capital (for example, plant and equipment)a firm owns.

Question 16

Consider the following types of demand curves:
a.a vertical demand curve
b.a horizontal demand curve
c.a linear downward-sloping demand curve
Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Accepted Answer

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

Question 17

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

Accepted Answer

A) Sales revenue falls by less than 5 percent. 
B) Sales revenue remains unchanged. 
C) Sales revenue falls by 100 percent. 
D) It cannot be determined without information on prices. 
A) Sales revenue falls by less than 5 percent. 
B) Sales revenue remains unchanged. 
C) Sales revenue falls by 100 percent. 
D) It cannot be determined without information on prices.

Question 18

If demand is perfectly elastic,the absolute value of the price elasticity coefficient is

Accepted Answer

A) infinity. 
B) zero. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve. 
A) infinity. 
B) zero. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve.

Question 19

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 externalities 
A) endowment effects 
B) endorsement effects 
C) economies of scale 
D) network externalities

Question 20

Each price-quantity combination on a consumer's demand curve shows the utility-maximizing quantity at the given price.

Accepted Answer

A) True 
 B)False

Total utility

Firms pay famous individuals to endorse their products because

Some online penny auctions charge a fee,such as $1,for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

What is the endowment effect?

Which of the following is a common mistake consumers commit when they make decisions?

Economists assume that the goal of consumers is to

If demand for a product is perfectly inelastic a change in price will not change total revenue.

Economist Jerry Hausman estimated the price elasticity of demand for breakfast cereal.He found that

A network externality occurs when

Figure 7-9 -Refer to Figure 7-9.Between points a and b on the demand curve,demand is

Total revenue is equal to

Consider the following types of demand curves: a.a vertical demand curve b.a horizontal demand curve c.a linear downward-sloping demand curve Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

If demand is perfectly elastic,the absolute value of the price elasticity coefficient is

Each price-quantity combination on a consumer's demand curve shows the utility-maximizing quantity at the given price.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 7: Consumer Choice and Elasticity

Total utility

Firms pay famous individuals to endorse their products because

Some online penny auctions charge a fee,such as $1,for every bid placed.Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

What is the endowment effect?

Which of the following is a common mistake consumers commit when they make decisions?

Economists assume that the goal of consumers is to

If demand for a product is perfectly inelastic a change in price will not change total revenue.

Economist Jerry Hausman estimated the price elasticity of demand for breakfast cereal.He found that

A network externality occurs when

Figure 7-9 -Refer to Figure 7-9.Between points a and b on the demand curve,demand is

Total revenue is equal to

Consider the following types of demand curves: a.a vertical demand curve b.a horizontal demand curve c.a linear downward-sloping demand curve Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

If demand is perfectly elastic,the absolute value of the price elasticity coefficient is

Each price-quantity combination on a consumer's demand curve shows the utility-maximizing quantity at the given price.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters