Exam 7: Consumer Choice and Elasticity

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

Professor Parallax chooses two students in his economics class,Jasmine and Cassandra,to participate in the ultimatum game.He chooses Jasmine to be the allocator and Cassandra to be the recipient.He gives Jasmine $50 and as the allocator,she gets to decide how to split the money with Cassandra.If Cassandra decides to accept the amount allocated to her by Jasmine,both students get to keep the money.If Cassandra decides to reject her allocation,neither student gets to keep the money.How much will each student end up with if each student acts as if fairness is important? How much will each student end up with if only Cassandra acts as if fairness is important? How much will each student end up with if neither student cares about fairness?

You wish to buy only one CD.Use the rule of equal marginal utility per dollar to determine which one to purchase: (a)Usher's latest CD for $15 which gives you 75 units of utility,or (b)Tom Petty and the Heartbreakers' Greatest Hits for $10 that gives you 100 units of utility?

If the demand for iPods is price elastic,then

If a firm's goal is to maximize revenue,it will price its product to correspond to the unit-elastic segment of its demand curve.

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit,and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased,she

Along a downward-sloping linear demand curve

Which of the following goods would have the most inelastic demand?

If a firm raised its price and discovered that its total revenue fell,then the demand for its product is

Assume that you own a small boutique hotel.In an attempt to raise revenue you reduce your rates by 20 percent.However,your revenue falls.What does this indicate about the demand for your boutique hotel rooms?

A common mistake made by consumers is the failure to take into account the sunk costs of their actions.

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?

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

A demand curve which is ________ represents perfectly inelastic demand,and a demand curve which is ________ represents inelastic demand.

For which of the following products is social influence likely to have the greatest impact?

If Ewan is consuming his utility maximizing bundle and the price of one good falls,what happens to the marginal utility per dollar spent on this good (MU/P),and what should Ewan do?

Economists assume people's tastes are identical.

Which of the following is explained by the law of diminishing marginal utility?

If a consumer receives 20 units of utility from consuming two candy bars,and 25 units of utility from consuming three candy bars,the marginal utility of the third candy bar is

Price elasticity of demand measures