Exam 7: Consumer Choice and Elasticity

Table 7-3 Ice Cream Cones Lime Fizz Soda Quantity 1 30 40 2 25 35 3 20 26 4 15 18 5 10 15 6 5 7 -Refer to Table 7-3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lime Fizz Soda.The price of an ice cream cone is $2 and the price of Lime Fizz Soda is $1.Use this information to select the correct statement.

A sunk cost is

Which of the following statements about the price elasticity of demand is correct?

The demand for all carbonated beverages is likely to be ________ the demand for Dr.Pepper.

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card,even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?

Suppose your marginal utility from consuming the 3rd slice of cake is zero,then your total utility from consuming cake is

Studies on consumer behavior have found that most people value fairness enough that they will refuse to participate in transactions they consider unfair,even if they are worse off as a result.How does this affect a firm's decision to raise prices in the event of a temporary increase in demand?

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand for the DVD for the movie The Hangover should be

Alan Krueger conducted a survey of fans at the 2001 Super Bowl who purchased tickets to the game for $325 or $400.Krueger found that (a)94 percent of those surveyed would not have paid $3,000 for their tickets,and (b)92 percent of those surveyed would not have sold their tickets for $3,000.These results are an example of

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good,with an income effect larger than its substitution effect,a good must be ________ and make up a ________ portion of a consumer's budget.

When diminishing marginal utility sets in,total utility must be negative.

Holding everything else constant,the demand for a good tends to be more elastic

If the price elasticity of demand is unit-elastic,a 10 percent increase in price will result in a 10 percent increase in revenue.

If,when you consume another piece of candy,your marginal utility is zero,then

If Paul decides to buy a $60 ticket to a Cirque du Soleil show rather than a $45 ticket for a Blue Man Group performance,we can conclude that

Table 7-2 Quantity of Soup (cups) Total Utility Quantity of Sandwiches Total Utility 1 40 1 45 2 60 2 75 3 72 3 102 4 82 4 120 5 88 5 135 6 90 6 145 Table 7-2 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 7-2.If Keira maximizes her utility,how many units of each good should she buy?

Research by Daniel Kahneman,Jack Knetsch,and Richard Thaler has shown that companies like airlines were explicitly able to include a fuel surcharge in their prices because

One possible reason as to why consumers respond to sales is that by displaying a "high" regular price and a "low" sale price,sales provide consumers with a reference point to interpret the prices being offered.

During a study session for an economics exam with three other students,Peter Daltry commented on an example of a consumer who had to decide the on number of slices of pizza and cups of Coca-Cola he would consume.Peter explained that "To maximize his utility this consumer must equate the marginal utility per dollar for pizza and Coca-Cola." Was Peter's analysis correct?

Behavioral economists examine choices that consumers make that are not economically rational.Economists generally assume that people are rational; that is,they weigh the benefits and costs of an action and choose an action only if the benefits outweigh the costs.Why do consumers not act rationally when the result is that they make themselves worse off?