Exam 6: Consumer Choice and Behavioural Economics

If,as a person consumes more and more of a good,each additional unit adds less satisfaction than the previous unit consumed,we are seeing the workings of

Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping.A logical reason for this is that the decline in fuel prices

The income effect of an increase in the price of peaches is

An increase in income results in an outward shift of an indifference curve.

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

Figure 6-7 -Refer to Figure 6-7.The change in the budget constraint from BC₁ to BC₂ implies

Firms pay famous individuals to endorse their products because

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?

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

Consider a downward-sloping demand curve.When the price of an inferior good decreases,the income and substitution effects

Health clubs typically experience an increase in one-year memberships in January,but many new customers cancel their memberships before the end of the year.Which of the following is the best explanation for this behaviour?

The income effect of a decrease in the price of legal services,a normal good,results in

The income effect of an increase in the price of salmon

The slope of an indifference curve

Suppose the marginal utilities for the first three cans of coke are 100,80 and 60,respectively.The total utility received from consuming 2 cans is

To maximise utility,consumers should buy goods and services to the point where the marginal utility of each item consumed is equal.

Assume that you had a ticket for a basketball playoff game that you bought for $50,the maximum price you were willing to pay.If a friend of yours offers to buy the ticket for $100 but you decide not to sell it,how can your decision be explained?

Consider a downward-sloping demand curve.When the price of a normal good decreases,the income and substitution effects

The law of diminishing marginal utility states that

Total utility