Question 1

Suppose a decrease in the supply of bottled water results in a decrease in revenue.This indicates that

Accepted Answer

A) the demand for bottled water is inelastic in the price range considered. 
B) the demand for bottled water is elastic in the price range considered. 
C) the supply of bottled water is inelastic in the price range considered. 
D) the supply of bottled water is elastic in the price range considered. 
A) the demand for bottled water is inelastic in the price range considered. 
B) the demand for bottled water is elastic in the price range considered. 
C) the supply of bottled water is inelastic in the price range considered. 
D) the supply of bottled water is elastic in the price range considered.

Question 2

The most important determinant of the price elasticity of demand for a good is

Accepted Answer

A) the definition of the market for a good. 
B) the availability of substitutes for the good. 
C) the share of the good in the consumer's budget. 
D) whether the good is a necessity or a luxury. 
A) the definition of the market for a good. 
B) the availability of substitutes for the good. 
C) the share of the good in the consumer's budget. 
D) whether the good is a necessity or a luxury.

Question 3

An item has utility for a consumer if it

Accepted Answer

A) is scarce. 
B) has a high price. 
C) is something everyone else wants. 
D) generates enjoyment or satisfaction. 
A) is scarce. 
B) has a high price. 
C) is something everyone else wants. 
D) generates enjoyment or satisfaction.

Question 4

Explain the endowment effect.

Accepted Answer

The endowment effect refers to the tende

Question 5

If Lisa spends her income on veggie burgers and pints of soy milk and the price of veggie burgers is three times the price of a pint of soy milk,then when Lisa maximizes her utility she will buy

Accepted Answer

A) both goods until the marginal utility of veggie burgers is three times the marginal utility of soy milk. 
B) three times as many veggie burgers as pints of soy milk. 
C) three times as many pints of soy milk as veggie burgers. 
D) both goods until the marginal utility of a pint of soy milk is three times the marginal utility of veggie burgers. 
A) both goods until the marginal utility of veggie burgers is three times the marginal utility of soy milk. 
B) three times as many veggie burgers as pints of soy milk. 
C) three times as many pints of soy milk as veggie burgers. 
D) both goods until the marginal utility of a pint of soy milk is three times the marginal utility of veggie burgers.

Question 6

Results of the ultimatum game indicate that most people value fairness enough that they will refuse to participate in a transaction they consider unfair,even if they are worse off financially as a result.

Accepted Answer

A) True 
 B)False

Question 7

The word "util" has been used by economists in the past as an objective measure of utility.Today economists believe that

Accepted Answer

A) utility cannot be measured objectively. 
B) utility can be measured objectively because people can use prices of different goods to measure utility. 
C) all of the important conclusions of the economic model of consumer behavior depend on utility being measured objectively. 
D) the util truly is an objective, rather than a subjective, measure of utility. 
A) utility cannot be measured objectively. 
B) utility can be measured objectively because people can use prices of different goods to measure utility. 
C) all of the important conclusions of the economic model of consumer behavior depend on utility being measured objectively. 
D) the util truly is an objective, rather than a subjective, measure of utility.

Question 8

Marginal utility is the

Accepted Answer

A) total satisfaction received from consuming a given number of units of a product. 
B) average satisfaction received from consuming a product. 
C) extra satisfaction received from consuming one more unit of a product. 
D) satisfaction achieved when a consumer has had enough of a product. 
A) total satisfaction received from consuming a given number of units of a product. 
B) average satisfaction received from consuming a product. 
C) extra satisfaction received from consuming one more unit of a product. 
D) satisfaction achieved when a consumer has had enough of a product.

Question 9

According to a study of the price elasticities of products sold in supermarkets,the price elasticity of demand for toothpaste is estimated at -0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?

Accepted Answer

A) The toothpaste industry is highly competitive. 
B) Toothpaste is relatively inexpensive. 
C) Toothpaste is heavily endorsed by dentists. 
D) There are few close substitutes for toothpaste. 
A) The toothpaste industry is highly competitive. 
B) Toothpaste is relatively inexpensive. 
C) Toothpaste is heavily endorsed by dentists. 
D) There are few close substitutes for toothpaste.

Question 10

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

Accepted Answer

A) rational consumer behavior. 
B) the endowment effect. 
C) the fallacy of composition. 
D) the failure to ignore sunk costs. 
A) rational consumer behavior. 
B) the endowment effect. 
C) the fallacy of composition. 
D) the failure to ignore sunk costs.

Question 11

The midpoint formula is used to measure the elasticity of demand between two points on a demand curve

Accepted Answer

A) when demand is elastic. 
B) in special cases when the percentage change in the quantity demanded is equal to the percentage change in price. 
C) to ensure that the elasticity has a negative value. 
D) to ensure that we have only one value of the price elasticity of demand between two points on a demand curve. 
A) when demand is elastic. 
B) in special cases when the percentage change in the quantity demanded is equal to the percentage change in price. 
C) to ensure that the elasticity has a negative value. 
D) to ensure that we have only one value of the price elasticity of demand between two points on a demand curve.

Question 12

Consider the following factors:
a.culture
b.religion
c.customs
d.prices
e.income
Which of the factors above are likely to influence the choices consumers make?

Accepted Answer

A) a, d, and e only 
B) all the factors except b 
C) all the factors except c 
D) d and e only 
E) all the factors listed 
A) a, d, and e only 
B) all the factors except b 
C) all the factors except c 
D) d and e only 
E) all the factors listed

Question 13

Which of the following demonstrates the endowment effect?

Accepted Answer

A) Whelan inherits a cottage in Cape Cod from his grandfather and is unwilling to sell it for sentimental reasons. 
B) Robert Pattinson commands a premium in the movie industry because he is endowed with dashing looks. 
C) Isabella was not willing to part with her "Robert Pattinson" poster although she was offered $100 for it, a sum greater than what it costs to purchase another such poster. 
D) If you received a good as a gift, you are less likely to attach a monetary value to the good. 
A) Whelan inherits a cottage in Cape Cod from his grandfather and is unwilling to sell it for sentimental reasons. 
B) Robert Pattinson commands a premium in the movie industry because he is endowed with dashing looks. 
C) Isabella was not willing to part with her "Robert Pattinson" poster although she was offered $100 for it, a sum greater than what it costs to purchase another such poster. 
D) If you received a good as a gift, you are less likely to attach a monetary value to the good.

Question 14

Arnold Kim began blogging about Apple products during his fourth year of medical school.Kim's website,MacRumors.com,became so successful that he decided to give up his medical career and work full time on his website,despite the nearly $200,000 he had invested in his education.In making his decision,the $200,000 he spent on his education

Accepted Answer

A) should be ignored since it represents a sunk cost. 
B) should be considered since it is money he has spent and needs to recoup. 
C) should be ignored only if Kim can earn more than $200,000 by running his website. 
D) should be considered since it is money he could have used to invest in his website. 
A) should be ignored since it represents a sunk cost. 
B) should be considered since it is money he has spent and needs to recoup. 
C) should be ignored only if Kim can earn more than $200,000 by running his website. 
D) should be considered since it is money he could have used to invest in his website.

Question 15

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

Accepted Answer

A) the fair trade principle 
B) the ultimatum game 
C) the preferential treatment game 
D) the behavioral experiment 
A) the fair trade principle 
B) the ultimatum game 
C) the preferential treatment game 
D) the behavioral experiment

Question 16

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3,then quantity demanded

Accepted Answer

A) will increase by 45 percent. 
B) will increase by 5 percent. 
C) will decrease by 45 percent. 
D) will decrease by 5 percent. 
A) will increase by 45 percent. 
B) will increase by 5 percent. 
C) will decrease by 45 percent. 
D) will decrease by 5 percent.

Question 17

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

Accepted Answer

The good must be an

Question 18

Wilbur Rickhiser,a financial advisor,recently told one of his clients: "The biggest mistake you can make is to hold onto a stock for too long in order to avoid a loss.Let's say you bought a stock for $50 per share but that six months later the price fell to $40 after a poor earnings report.Many of my clients in this situation will hold the stock,hoping the price will later rise above $50.In most cases like this the price does not rise and may even fall.You must know when to cut your losses." Which of the following is the best explanation for Rickhiser's advice?

Accepted Answer

A) People sometimes buy stocks because other people are buying them or they want to appear to be fashionable. 
B) People sometimes make mistakes when they buy stocks because of the endowment effect. 
C) People sometimes make mistakes when they buy stocks or when they buy goods and services: they ignore the monetary opportunity costs of their choices. 
D) People often fail to ignore the sunk costs of their decisions.The cost of the stock bought at $50 per share is a sunk cost. 
A) People sometimes buy stocks because other people are buying them or they want to appear to be fashionable. 
B) People sometimes make mistakes when they buy stocks because of the endowment effect. 
C) People sometimes make mistakes when they buy stocks or when they buy goods and services: they ignore the monetary opportunity costs of their choices. 
D) People often fail to ignore the sunk costs of their decisions.The cost of the stock bought at $50 per share is a sunk cost.

Question 19

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase,quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?

Accepted Answer

A) 40 percent 
B) 25 percent 
C) 2.5 percent 
D) 0.4 percent 
A) 40 percent 
B) 25 percent 
C) 2.5 percent 
D) 0.4 percent

Question 20

Which of the following statements is true about the price elasticity of demand along a downward sloping linear demand curve?

Accepted Answer

A) It is inelastic at high prices and elastic at low prices. 
B) It is unit-elastic throughout the demand curve. 
C) It is elastic at high prices and inelastic at low prices. 
D) It is perfectly elastic at very high prices and perfectly inelastic at very low prices. 
A) It is inelastic at high prices and elastic at low prices. 
B) It is unit-elastic throughout the demand curve. 
C) It is elastic at high prices and inelastic at low prices. 
D) It is perfectly elastic at very high prices and perfectly inelastic at very low prices.

Suppose a decrease in the supply of bottled water results in a decrease in revenue.This indicates that

The most important determinant of the price elasticity of demand for a good is

An item has utility for a consumer if it

Explain the endowment effect.

If Lisa spends her income on veggie burgers and pints of soy milk and the price of veggie burgers is three times the price of a pint of soy milk,then when Lisa maximizes her utility she will buy

Results of the ultimatum game indicate that most people value fairness enough that they will refuse to participate in a transaction they consider unfair,even if they are worse off financially as a result.

The word "util" has been used by economists in the past as an objective measure of utility.Today economists believe that

Marginal utility is the

According to a study of the price elasticities of products sold in supermarkets,the price elasticity of demand for toothpaste is estimated at -0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?

The midpoint formula is used to measure the elasticity of demand between two points on a demand curve

Consider the following factors: a.culture b.religion c.customs d.prices e.income Which of the factors above are likely to influence the choices consumers make?

Which of the following demonstrates the endowment effect?

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3,then quantity demanded

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase,quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?

Which of the following statements is true about the price elasticity of demand along a downward sloping linear demand curve?

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

Suppose a decrease in the supply of bottled water results in a decrease in revenue.This indicates that

The most important determinant of the price elasticity of demand for a good is

An item has utility for a consumer if it

Explain the endowment effect.

If Lisa spends her income on veggie burgers and pints of soy milk and the price of veggie burgers is three times the price of a pint of soy milk,then when Lisa maximizes her utility she will buy

Results of the ultimatum game indicate that most people value fairness enough that they will refuse to participate in a transaction they consider unfair,even if they are worse off financially as a result.

The word "util" has been used by economists in the past as an objective measure of utility.Today economists believe that

Marginal utility is the

According to a study of the price elasticities of products sold in supermarkets,the price elasticity of demand for toothpaste is estimated at -0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?

The midpoint formula is used to measure the elasticity of demand between two points on a demand curve

Consider the following factors: a.culture b.religion c.customs d.prices e.income Which of the factors above are likely to influence the choices consumers make?

Which of the following demonstrates the endowment effect?

Which of the following is an experiment which tests whether fairness is important in consumer decision making?

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3,then quantity demanded

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase,quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?

Which of the following statements is true about the price elasticity of demand along a downward sloping linear demand curve?

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