Question 1

Which of the following could explain why the demand for table salt is inelastic?

Accepted Answer

A)  Salt is a luxury good. 
B)  Salt is a rare commodity. 
C)  Households devote a very small portion of their income to salt purchases. 
D)  Salt is a luxury for high-income consumers but a necessity for low-income consumers. 
A)  Salt is a luxury good. 
B)  Salt is a rare commodity. 
C)  Households devote a very small portion of their income to salt purchases. 
D)  Salt is a luxury for high-income consumers but a necessity for low-income consumers. C

Question 2

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

Accepted Answer

A) True 
 B)False  True

Question 3

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other,similar products.These economists believe that

Accepted Answer

A)  consumers are always rational. 
B)  in practice, the gains from using a superior technology exceed the losses consumers incur from switching costs. 
C)  there is no good evidence that switching costs exist. 
D)  the government will prevent products with inferior technology from being sold to consumers. 
A)  consumers are always rational. 
B)  in practice, the gains from using a superior technology exceed the losses consumers incur from switching costs. 
C)  there is no good evidence that switching costs exist. 
D)  the government will prevent products with inferior technology from being sold to consumers. B

Question 4

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 5

Molly received an autographed poster of David Hasselhoff for her 21st birthday.Her friend Helga offered her $50 for the poster,but Molly refused to sell the poster even though she knows she would never pay that much to replace it if it was ever damaged or destroyed.Explain this inconsistency in Molly's behavior.

Accepted Answer

The inconsistency comes from Molly's fai

Question 6

If at a price of $10,a vendor sells 5 units of a product and at a price of $8,6 units are sold.Using the midpoint formula,the demand for this good is inelastic.

Accepted Answer

A) True 
 B)False

Question 7

Goods with upward sloping demand curves are referred to as

Accepted Answer

A)  Marshall goods. 
B)  Giffen goods. 
C)  substitute goods. 
D)  luxury goods. 
A)  Marshall goods. 
B)  Giffen goods. 
C)  substitute goods. 
D)  luxury goods.

Question 8

Table 7-4
 $\begin{array}{|c|c|c|c|c|}
\hline & \text { Steak \& Cheese } & \text { Steak \& Cheese } & \text { Grilled Chicken } & \text { Grilled Chicken } \
\hline \text { Quantity } & M U & M U / P & M U & M U / P \
\hline 1 & 40 & 10 & 30 & 15 \
\hline 2 & 32 & 8 & 24 & 12 \
\hline 3 & 20 & 5 & 16 & 8 \
\hline 4 & 12 & 3 & 12 & 6 \
\hline 5 & 6 & 1.5 & 8 & 4 \
\hline 6 & 2 & 0.5 & 4 & 2 \
\hline
\end{array}$
-Refer to Table 7-4.For steak and cheese sandwiches 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 sandwiches 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 9

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?

Accepted Answer

A)  Most allocators chose to give themselves $18 and $2 to the other students. 
B)  Most of the students who were not allocators did not like having someone else make decisions for them. 
C)  A majority of the female allocators chose option (a); a majority of the male allocators chose option (b). 
D)  Most of the allocators apparently valued acting fairly. 
A)  Most allocators chose to give themselves $18 and $2 to the other students. 
B)  Most of the students who were not allocators did not like having someone else make decisions for them. 
C)  A majority of the female allocators chose option (a); a majority of the male allocators chose option (b). 
D)  Most of the allocators apparently valued acting fairly.

Question 10

Economists assume people's tastes are identical.

Accepted Answer

A) True 
 B)False

Question 11

Figure 7-4
  
-Refer to Figure 7-4.A perfectly elastic demand curve is shown in

Accepted Answer

A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D. 
A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D.

Question 12

Sunk costs

Accepted Answer

A)  are costs associated with repairing something you already own. 
B)  are important for optimal decision making. 
C)  are costs that have already been paid and cannot be recaptured in any significant way. 
D)  are costs that firms sink into marketing. 
A)  are costs associated with repairing something you already own. 
B)  are important for optimal decision making. 
C)  are costs that have already been paid and cannot be recaptured in any significant way. 
D)  are costs that firms sink into marketing.

Question 13

You participate in a taste test for a new protein supplement called "Kapow." You are given five consecutive one ounce vials of the supplement and after consuming each vial you are asked to note your reaction.You consume the first vial and your response is: "Hmmm,quite good!" After the second,you say,"Not bad at all." After the third,you note,"It's alright." and after the fourth you wince,"No more,the after-taste is getting to me.I need water." What economic principle does this scenario illustrate? Define the principle.

Accepted Answer

It illustrates the law of diminishing ma

Question 14

Table 7-12
 $\begin{array}{|r|c|c|}
\hline \text { Price of Book } & \begin{array}{c}
\text { Copies Sold at } \
\text { That Price }
\end{array} & \begin{array}{c}
\text { Total Revenue at } \
\text { That Price }
\end{array} \
\hline \$ 14.99 & 100,000 & \$ 1,499,000 \
\hline 9.99 & 174,000 & 1,738,00 \
\hline
\end{array}$
-Refer to Table 7-12.Based on the data in the table and using the midpoint formula,between a price of $9.99 and $14.99,the price elasticity of demand for books is

Accepted Answer

A)  -0.74. 
B)  -1.16. 
C)  -1.35. 
D)  -14.8. 
A)  -0.74. 
B)  -1.16. 
C)  -1.35. 
D)  -14.8.

Question 15

Economists Gary Becker and Kevin Murphy are associated with which of the following?

Accepted Answer

A)  They discovered the first example of a Giffen good. 
B)  They have argued that social factors are not important in explaining the choices consumers make. 
C)  They both believe that consumers appear to receive utility from consuming goods they believe are popular. 
D)  They discovered that price changes have both income and substitution effects. 
A)  They discovered the first example of a Giffen good. 
B)  They have argued that social factors are not important in explaining the choices consumers make. 
C)  They both believe that consumers appear to receive utility from consuming goods they believe are popular. 
D)  They discovered that price changes have both income and substitution effects.

Question 16

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

Accepted Answer

The two effects are the substitution and

Question 17

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

Accepted Answer

A)  behavioral economics. 
B)  irrational economics. 
C)  social economics. 
D)  new wave economics. 
A)  behavioral economics. 
B)  irrational economics. 
C)  social economics. 
D)  new wave economics.

Question 18

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

Accepted Answer

A)  25 utils. 
B)  20 utils. 
C)  5 utils. 
D)  unknown as more information is needed to determine the answer. 
A)  25 utils. 
B)  20 utils. 
C)  5 utils. 
D)  unknown as more information is needed to determine the answer.

Question 19

Table 7-4
 $\begin{array}{|c|c|c|c|c|}
\hline & \text { Steak \& Cheese } & \text { Steak \& Cheese } & \text { Grilled Chicken } & \text { Grilled Chicken } \
\hline \text { Quantity } & M U & M U / P & M U & M U / P \
\hline 1 & 40 & 10 & 30 & 15 \
\hline 2 & 32 & 8 & 24 & 12 \
\hline 3 & 20 & 5 & 16 & 8 \
\hline 4 & 12 & 3 & 12 & 6 \
\hline 5 & 6 & 1.5 & 8 & 4 \
\hline 6 & 2 & 0.5 & 4 & 2 \
\hline
\end{array}$
-Refer to Table 7-4.For steak and cheese sandwiches 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 sandwiches 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 20

Which of the following is not a common mistake made by consumers?

Accepted Answer

A)  the failure to take into account the implicit costs of an activity 
B)  the failure to ignore sunk costs 
C)  being overly optimistic about their future behavior 
D)  being overly pessimistic about their future behavior 
A)  the failure to take into account the implicit costs of an activity 
B)  the failure to ignore sunk costs 
C)  being overly optimistic about their future behavior 
D)  being overly pessimistic about their future behavior

Which of the following could explain why the demand for table salt is inelastic?

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other,similar products.These economists believe that

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.

If at a price of $10,a vendor sells 5 units of a product and at a price of $8,6 units are sold.Using the midpoint formula,the demand for this good is inelastic.

Goods with upward sloping demand curves are referred to as

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?

Economists assume people's tastes are identical.

Figure 7-4 -Refer to Figure 7-4.A perfectly elastic demand curve is shown in

Sunk costs

Table 7-12 Price of Book Copies Sold at That Price Total Revenue at That Price \ 14.99 100,000 \ 1,499,000 9.99 174,000 1,738,00 -Refer to Table 7-12.Based on the data in the table and using the midpoint formula,between a price of $9.99 and $14.99,the price elasticity of demand for books is

Economists Gary Becker and Kevin Murphy are associated with which of the following?

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

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

Which of the following is not a common mistake made by consumers?

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

Which of the following could explain why the demand for table salt is inelastic?

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other,similar products.These economists believe that

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.

If at a price of $10,a vendor sells 5 units of a product and at a price of $8,6 units are sold.Using the midpoint formula,the demand for this good is inelastic.

Goods with upward sloping demand curves are referred to as

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?

Economists assume people's tastes are identical.

Figure 7-4 -Refer to Figure 7-4.A perfectly elastic demand curve is shown in

Sunk costs

Table 7-12 Price of Book Copies Sold at That Price Total Revenue at That Price \ 14.99 100,000 \ 1,499,000 9.99 174,000 1,738,00 -Refer to Table 7-12.Based on the data in the table and using the midpoint formula,between a price of $9.99 and $14.99,the price elasticity of demand for books is

Economists Gary Becker and Kevin Murphy are associated with which of the following?

The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

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

Which of the following is not a common mistake made by consumers?

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