Exam 6: Consumer Choice and Behavioural Economics

Eliza consumes 12 cappuccinos and 8 apple turnovers per week.The price of cappuccino is $4 each and apple turnovers are $1 each. a.What is the amount of income allocated to cappuccino and apple turnover consumption? b.What is the price ratio (the price of cappuccino relative to the price of apple turnovers)? c.Explain the meaning of the price ratio you computed. d.If Eliza maximises utility,what is the ratio of the marginal utility of cappuccino to the marginal utility of apple turnovers? e.If the price of apple turnovers falls,will Eliza consume more apple turnovers,fewer apple turnovers or the same amount of apple turnovers? Explain your answer using the rule of equal marginal utility per dollar.

Under Big W's everyday low pricing policy,the everyday low prices

If preferences are transitive,indifference curves

Marginal utility is the

If a consumer receives 22 units of marginal utility from consuming the first can of lemonade,20 units from consuming the second,and 15 from the third,the total utility of consuming the three units is

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions,yet studies conducted by behavioural economists reveal that sunk costs often affect economic decisions.Which of the following could explain this observation?

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?

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

Which of the following is used to explain why a consumer's willingness to buy a mobile increases as the number of other people who own and use mobiles increases?

The iPod is a product without any significant network externalities.

Figure 6-1 -Refer to Figure 6-1.Which of the following statements is true?

A network externality refers to a situation in which the usefulness of a product decreases with the number of consumers who use it.

If a consumer receives 20 units of utility from consuming two chocolate bars,and 25 units of utility from consuming three chocolate bars,the marginal utility of the second chocolate bar is

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

Some economists have argued that path dependency and switching costs can lead to market failure.Which of the following is an example of this argument?

Each price-quantity combination on a consumer's demand curve shows the utility-maximising quantity at the given price.

If you received negative marginal utility from consuming the 4th slice of pizza,then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.

Figure 6-4 -Refer to Figure 6-4.The consumer can afford consumption bundles

The demand curve for corn is downward sloping.If the price of corn,an inferior good,falls,

All of the following products are most likely to have significant network externalities except