Question 1

The substitution effect of a price increase causes a decrease in the quantity demanded of an inferior good.

Accepted Answer

A) True 
 B)False  True

Question 2

If Ewan is consuming his utility maximising 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?

Accepted Answer

A) MU/P has increased,and Ewan should buy more of this good. 
B) MU/P has increased,and Ewan should buy less of this good. 
C) MU/P has decreased,and Ewan should buy more of this good. 
D) MU/P has decreased,and Ewan should buy less of this good. 
A) MU/P has increased,and Ewan should buy more of this good. 
B) MU/P has increased,and Ewan should buy less of this good. 
C) MU/P has decreased,and Ewan should buy more of this good. 
D) MU/P has decreased,and Ewan should buy less of this good. A

Question 3

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed,Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

Accepted Answer

A) income effect only or substitution effect only but not both effects 
B) income and substitution effects 
C) price effect 
D) consumption effect 
A) income effect only or substitution effect only but not both effects 
B) income and substitution effects 
C) price effect 
D) consumption effect B

Question 4

Economists assume people's tastes are identical.

Accepted Answer

A) True 
 B)False

Question 5

Most people would prefer to drive a luxury car that has all the options,but more people buy less expensive cars even though they could afford the luxury car because

Accepted Answer

A) car buyers are irrational. 
B) the total utility of less expensive cars is greater than that of luxury cars. 
C) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars. 
D) luxury cars cost a lot more than non-luxury cars. 
A) car buyers are irrational. 
B) the total utility of less expensive cars is greater than that of luxury cars. 
C) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars. 
D) luxury cars cost a lot more than non-luxury cars.

Question 6

One reason university students do not study enough to get high grades is that they are unrealistic about their future behaviour.

Accepted Answer

A) True 
 B)False

Question 7

Table 6-4
  
-Refer to Table 6-4.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 maximises her utility,she will buy three grilled chicken sandwiches. 
C) If Mabel maximises 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 maximise her utility. 
A) The price of steak and cheese sandwiches is $4.The price of grilled chicken sandwiches is $2. 
B) If Mabel maximises her utility,she will buy three grilled chicken sandwiches. 
C) If Mabel maximises 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 maximise her utility.

Question 8

Carolyn spends her income on popular magazines and music CDs.If the price of a CD is four times the price of a magazine and if Carolyn is maximising her utility,she buys

Accepted Answer

A) both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased. 
B) both goods until the marginal utility of the last magazine purchased is four times the marginal utility of the last CD purchased. 
C) four times as many magazines as CDs. 
D) four times as many CDs as magazines. 
A) both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased. 
B) both goods until the marginal utility of the last magazine purchased is four times the marginal utility of the last CD purchased. 
C) four times as many magazines as CDs. 
D) four times as many CDs as magazines.

Question 9

A sunk cost is a cost that has already been paid and cannot be recovered.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is false?

Accepted Answer

A) There is an indifference curve associated with any combination of goods selected by a consumer. 
B) A consumer is indifferent among all consumption bundles along a given budget line. 
C) All consumption bundles along a given indifference curve are equally desirable. 
D) Consumption bundles that lie on higher indifference curves yield higher utility. 
A) There is an indifference curve associated with any combination of goods selected by a consumer. 
B) A consumer is indifferent among all consumption bundles along a given budget line. 
C) All consumption bundles along a given indifference curve are equally desirable. 
D) Consumption bundles that lie on higher indifference curves yield higher utility.

Question 11

In explaining consumer behaviour,economists explain how consumer tastes and preferences are formed.

Accepted Answer

A) True 
 B)False

Question 12

If the marginal utility Ida Mae receives from eating chicken wings is negative,then

Accepted Answer

A) her total utility from eating chicken wings has fallen. 
B) her total utility from eating chicken wings is negative as well. 
C) Ida Mae definitely does not like chicken wings. 
D) her total utility has risen,but by less from the last chicken wing than from the next to last chicken wing. 
A) her total utility from eating chicken wings has fallen. 
B) her total utility from eating chicken wings is negative as well. 
C) Ida Mae definitely does not like chicken wings. 
D) her total utility has risen,but by less from the last chicken wing than from the next to last chicken wing.

Question 13

Marginal utility can be

Accepted Answer

A) negative. 
B) zero. 
C) positive. 
D) positive,negative or zero. 
A) negative. 
B) zero. 
C) positive. 
D) positive,negative or zero.

Question 14

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

Accepted Answer

A) maximised. 
B) decreasing. 
C) negative. 
D) increasing. 
A) maximised. 
B) decreasing. 
C) negative. 
D) increasing.

Question 15

The slope of the indifference curve is referred to as

Accepted Answer

A) the marginal rate of substitution. 
B) the price ratio. 
C) the marginal rate of consumption. 
D) the marginal trade-off rate. 
A) the marginal rate of substitution. 
B) the price ratio. 
C) the marginal rate of consumption. 
D) the marginal trade-off rate.

Question 16

The marginal rate of substitution is determined by the slope of an indifference curve.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

Accepted Answer

A) Petra's utility from her second apple was less than her satisfaction from her first orange. 
B) Hudson enjoyed his second slice of pizza more than his first. 
C) Sabine's utility from her first granola bar is greater than Rachel's utility from her second granola bar. 
D) Wesley enjoyed his second bottle of iced tea less than his first bottle,other things constant. 
A) Petra's utility from her second apple was less than her satisfaction from her first orange. 
B) Hudson enjoyed his second slice of pizza more than his first. 
C) Sabine's utility from her first granola bar is greater than Rachel's utility from her second granola bar. 
D) Wesley enjoyed his second bottle of iced tea less than his first bottle,other things constant.

Question 18

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

Accepted Answer

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

Question 19

Behavioural economics helps explain why customers ________ at Big W.

Accepted Answer

A) favoured the policy of everyday low prices and not sales and coupons 
B) favoured sales and coupons and not the policy of everyday low prices 
C) were equally happy with sales and coupons and the policy of everyday low prices 
D) responded negatively to both sales and coupons and the policy of everyday low prices 
A) favoured the policy of everyday low prices and not sales and coupons 
B) favoured sales and coupons and not the policy of everyday low prices 
C) were equally happy with sales and coupons and the policy of everyday low prices 
D) responded negatively to both sales and coupons and the policy of everyday low prices

Question 20

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

Accepted Answer

A) True 
 B)False

The substitution effect of a price increase causes a decrease in the quantity demanded of an inferior good.

If Ewan is consuming his utility maximising 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?

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed,Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

Economists assume people's tastes are identical.

Most people would prefer to drive a luxury car that has all the options,but more people buy less expensive cars even though they could afford the luxury car because

One reason university students do not study enough to get high grades is that they are unrealistic about their future behaviour.

Carolyn spends her income on popular magazines and music CDs.If the price of a CD is four times the price of a magazine and if Carolyn is maximising her utility,she buys

A sunk cost is a cost that has already been paid and cannot be recovered.

Which of the following statements is false?

In explaining consumer behaviour,economists explain how consumer tastes and preferences are formed.

If the marginal utility Ida Mae receives from eating chicken wings is negative,then

Marginal utility can be

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

The slope of the indifference curve is referred to as

The marginal rate of substitution is determined by the slope of an indifference curve.

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

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

Behavioural economics helps explain why customers ________ at Big W.

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

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 6: Consumer Choice and Behavioural Economics

The substitution effect of a price increase causes a decrease in the quantity demanded of an inferior good.

If Ewan is consuming his utility maximising 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?

The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00.Although her money income had not changed,Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant.Toni's actions are explained by which of the following?

Economists assume people's tastes are identical.

Most people would prefer to drive a luxury car that has all the options,but more people buy less expensive cars even though they could afford the luxury car because

One reason university students do not study enough to get high grades is that they are unrealistic about their future behaviour.

Carolyn spends her income on popular magazines and music CDs.If the price of a CD is four times the price of a magazine and if Carolyn is maximising her utility,she buys

A sunk cost is a cost that has already been paid and cannot be recovered.

Which of the following statements is false?

In explaining consumer behaviour,economists explain how consumer tastes and preferences are formed.

If the marginal utility Ida Mae receives from eating chicken wings is negative,then

Marginal utility can be

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

The slope of the indifference curve is referred to as

The marginal rate of substitution is determined by the slope of an indifference curve.

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

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

Behavioural economics helps explain why customers ________ at Big W.

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

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters