CH10 micro

The table to the right shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3 Kiera has $18 to spend on these two goods. Suppose Kiera's income increases from $18 to $23 but prices have not changed. What is her utility maximising bundle now. -6 cups of soup and 5 sandwiches —5 cups of soup and 5 sandwiches -4 cups of soup and 5 sandwiches -5 cups of soup and 4 sandwiches

-4 cups of soup and 5 sandwiches

Sunk costs -are important for optimal decision making -are costs that firms sink into marketing -are costs associated with repairing something you already own -are costs that have already been paid and cannot be recaptured in any significant way

-are costs that have alresdy been paid and cannot be recaptures in any significant way

We can derive the market demand curve for gold earrings -by adding vertically the quantity demanded of each gold ear ring consumed at each price -by adding horizontally the individual demand curves of each gold earring consumer -by adding the prices of each gold earring consumer is willing to pay for each quantity -only if the tastes of all gold earring consumers are similar

-by adding horizontally the individual demand curves of each gold earring consumer

marginal utility is the -average satisfaction received from consuming a product -satisfaction achieved when a consumer has had enough of a product -total satisfaction received from consuming a given number of units of a product -extra satisfaction received from consuming one more unit of a product

-extra satisfaction received from consuming one more unit of a product

The demand curve for an inferior good can never be downward sloping -true or false

-false

The iPod is a product without any significant network externalities. True or false

-false

If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is -35 utils -57 utils -15 utils -unknown as more information is needed to determine the answer

57 utils

The observation that people tend to value something more highly when they own it than when they don't is called the -path dependent effect -endorsement effect -wealth effect -endowment effect

Endowment effect

A consumer maximises her total utility from a bundle of hood when her marginal utility from each hood is equal True or false

False

An item has utility for a consumer if it- A) generates enjoyment or satisfaction. B) is something everyone else wants. C) has a high price. D) is scarce.

generates enjoyment or satisfaction

Consider all of the following factors: Culture Religion Customs Prices Income. Which of the factors above are likely to influence the choices consumers make. -d and E only -a, d, and E only -all the factors except b -all the factors except c -all the factors listed

All the factors listed

All of the following products are likely to have significant network externalities except -Twitter -popular board games -cat food -cell phones

Cat food

The marginal utility per dollar that Harold stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears. To maximise his utility what should Harold do. -he should buy fewer oranges and more pears -he should reduce his consumption of both oranges and pears so that he can buy a greater variety of goods -he should acquire more income so that he can afford to buy more oranges and pears -he should buy fewer pears and more oranges

He should buy fewer pears and more oranges

Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time. In less than a week she discovered that the shoes were uncomfortable. Grace went back to wearing her old pair and stashed away the new pair. When asked by her boss, Mme. Ramotswe why does she not simply give away the new pair, she said: "But I paid so much for them." Grace's behavior: A. is rational: she should not discard a valuable item B. supports the endowment effect which states that ownership of an item makes it more valuable C. is rational because the more you pay for an item the more valuable it is D. ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give them away or not.

Ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give it away or not

When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to -the deadweight loss effect -the elasticity effect -the income effect -the substitution effect

Income effect

Economist assume that the goal of consumers is to -spend all their income -consumer as much as possible -make themselves as well off as possible -do as little work as possible to survive

Make themselves as well off as possible

to use celebrity endorsement -more utility -increased path dependency -diminishing utility -greater network externalities

More utility

The highest-valued alternative that must be given up to engage in an activity is the definition of -opportunity cost -implicit cost -economic sacrifice -utility

Opportunity cost

For which of the following products is social influence likely to have the greatest impact -high blood pressure medication -toothpaste -school textbook -restaurants

Restaurants

Identify one statement that does not demonstrate how social effects influence consumer choice. -there is utility gain d from consuming goods or services that others are consuming -companies such as Zappos.con and Netflix invite their consumers to write reviews about their experience with their products which are then posted on the internet for others to see -students in an economics class are required to purchase a textbooks assigned by the professor -some products that people consumer are determined by the social popularity of the products

Students in an economics class are required to purchase a textbook assigned by the professor

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 -the law of diminishing marginal utility -the law of demand -the law of increasing marginal opportunity cost -the law of supply

The law or diminishing marginal utility

Along a downward-sloping linear demand curve -the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remain constant -the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase -the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases -the marginal utility from the consumption of each unit of the good and the total utility from

The marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases

If Paul decided to buy a $60 ticket to a cirque du soleil show rather than a $45 58,&36 for a blue man group performance, we can conclude that -the marginal utility per dollar spent on the cirque is higher than the marginal utility per dollar spend on the blue man group -Paul is not making a rational choice -the marginal utility per dollar spent on cirque is lower than the marginal utility per dollar spent on the blue man group -Paul's demand for a ticket to see the cirque is more elastic than his demand for a ticket to see blue man group

The marginal utility per dollar spent on cirque is higher than the marginal utility per dollar spent on the blue man group

Alan Kruger conducted a survey of fans at the 2001 super fowl who purchased tickets to the game for $325 or $400. Kruger found that (a) 94 percent of those surveyed would not have paid $3000 for their tickets and (b) 92 percent of those surveyed would not have sold their tickets for $3,000. These results are an example of -the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay if they did not already own it -the tendancy for consumers to account for monetary costs but to ignore dunk costs -the law of demand -consumers placing a high value on a product because it makes them appear to be fashionable

The tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay if they did not already own it

Is an experiment that tests the significance of fairness in consumer decision making -the ultimatum game -the fairness challenge -the consumer choose paradigm -the giffen paradox

The ultimatum game

Economists have shown that when the ultimatum game experiment is carried out, both allocators and recipients acts as if fairness is important. True or false

True

The income effect results in consumers increasing the quantity of normal goods demanded when the price falls. True or false

True

Which of the following is likely to occur as the result of the law or diminishing marginal utility? -sabines utility from her first granola bar is greater than Rachel's utility from her second granola bar -Petra's utility from her second apple was less than her satisfaction from her first orange -Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant -Hudson enjoyed his second slice of pizza more than his first

Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant