Exam 7: Consumer Choice and Elasticity

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,Kim decided to ignore the money and time he spent on his education.Economists would say that Kim made a

Figure 7-1 -Refer to Figure 7-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q₁ to Q₀.This change in quantity demanded is due to

In the ultimatum game,allocators usually offer recipients at least a 40 percent share of the money,and recipients almost always reject offers of less than a 10 percent share.Which of the following does not explain why allocators offer recipients a relatively generous share and why recipients reject meager offers?

Consider a good whose consumption takes place publicly.Your decision to buy that good depends

The observation that people tend to value something more highly when they own it than when they don't is called the

Economists have used ________ and ________ in experiments designed to determine whether consumers care about fairness when they make decisions.

When demand is elastic,a fall in price causes total revenue to rise because

If at a price of $50,Ghani sells 20 hand-made leather cell-phone covers but at a price of $60,zero units are sold.Based on this information,the demand for his cell-phone covers is

Table 7-2 Table 7-2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods. -Refer to Table 7-2.Holding prices constant,when Keira's income changed from $18 to $23,what happens to her total utility and to the marginal utilities of the last cup of soup and the last sandwich purchased?

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

Jonah lives in a small town where there is only one Mexican restaurant.Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

Behavioral economics is the study of situations in which people make rational choices.

Professor Parallax chooses two students in his economics class,Jasmine and Cassandra,to participate in the ultimatum game.He chooses Jasmine to be the allocator and Cassandra to be the recipient.He gives Jasmine $50 and as the allocator,she gets to decide how to split the money with Cassandra.If Cassandra decides to accept the amount allocated to her by Jasmine,both students get to keep the money.If Cassandra decides to reject her allocation,neither student gets to keep the money.How much will each student end up with if each student acts as if fairness is important? How much will each student end up with if only Cassandra acts as if fairness is important? How much will each student end up with if neither student cares about fairness?

Suppose that at a price of $55,100 units were sold while at a price of $33,153 units were sold.Without calculating the price elasticity value,can you determine whether demand is elastic,unit-elastic,or inelastic? Explain your answer.

If the market for a product is narrowly defined,then there are likely to be many substitutes for the product and the demand for the product is relatively elastic.

If total utility increases at a decreasing rate as a consumer consumes more coffee,then marginal utility must

The average price of gasoline in your neighborhood is $3.53 per gallon.Your neighbor,Diana tells you that you can "save a lot" by frequenting a gas station 20 miles outside your neighborhood where the price of gasoline is $3.46 per gallon However,she cautions you that there usually long lines at that station.Is her suggestion beneficial to you?

If the market for a product is broadly defined,then

If a consumer always buys goods rationally,then

Which of the following does not explain why consumers buy products that many other consumers are already buying?