Economic chapter 10 reading quiz

According to the law of diminishing marginal utility, as the consumption of a particular good increase

Marginal utility decreases

What happens when network externalities are present?

the usefulness of a product increases with the number of consumers who use it

In the ultimatum game, if neither the allocator nor the recipient cared about fairness, what would be the optimal distribution of 20.00?

19.99 for the recipient and 0.01 for the allocator

Use the information in the following table to calculate the marginal utility from consuming the second ice cream cone

8

The substitution effect is the change in the quantity demanded of a good that result from _______________, Holding constant the effect of the price change on consumer purchasing power

A change in price-making the good more or less expensive relative to other goods

The graph shows your weekly demand for pizza. How was this demand curve constructed?

By computing your optimal consumption of pizza at the various price shown, all other variables that affect your demand for pizza held constant

Which of the following mistakes do consumers commonly commit when making decisions

All of the above are mistakes consumers commonly commit when making decisions

Which of the following reasons to kind of get you to explain why people are overweight

All of the above explains why people are overweight

Consumption bundles are a affordable if they are _______________ the budget constraint line

Both a and b are correct

An indifference curve shows combinations of consumption bundles that maximize a consumer's utility

False

Rule of thumb are guides to decision making that always produce optimal choices

False

Utility refer to how much consumers utilize a product or service

False

When consumers move down his or her indifference curve, the gain in utility from consuming more of one good will exceed the loss in utility from consuming less of the other good

False

According to the endowment effect, people appear to be having irrationally when they are unwilling to sell a good they already own in which of the following situations?

If they are offered a price greater than the price they would pay if they did not already owned a good

The income effect causes quantity demanded to _________________when the price of a normal good decreases, and causes quantity demanded to __________________ when the price of an inferior good decreases

Increase, decrease

What is a budget constraint?

It is the limited amount of income available to consumers to spend on goods and services

When the price of one product falls relative to The price of another product, The substitution effect is represented by ___________________and the income effect is represented by ______________

Moving to a new point on the same indifference curve , moving to a point on a new indifference curve

A fall in the price of a good will rotate the budget constraint _____________ and make it possible for a consumer to reach higher indifference curves. As a result, the consumer will _______________ the quantity of a good demanded

Outward. Increase

In considering the attitude of consumers toward fairness ,which of the following have economists found to be true

People attempt to treat others fairly, even in doing so makes them worse off financially

____________________, winner of the 2017 Noble prize in economics , has popularized the idea of devising nudges to lead people to make better decisions

Richard Thaler

What happens when consumption of a product is path depended?

The cost of switching to a product with a better technology gives the product with the initial technology and advantage

Along an indifference curve, the slope tells us the rate at which the consumer is willing to trade of one product for another while keeping the consumers utility constant

True

If people are uncertain whether the price of a product is high or low, they open compare the price to the previous price of the product

True

If the price of product remain the same, an increase in income shifts the budget constraint outward.

True

In many cases, the popularity of people who use a product can make the product desirable

True

Indifference curve can never cross

True

The economic model of consumer behavior predicts that consumers will choose to buy the combination of goods and services that make them as well off as possible from among all the combinations that their budget allowed them to buy

True

The optimal combination of pizza and coke you should consume is the one

Where your marginal utility per dollar spent on pizza equals your marginal utility per dollar spent on coke

The marginal utility per dollar you are spending on iTunes music downloads is less than the marginal utility per dollar you are spending on Red bull. According to the rule of equal marginal utility per dollar spent, what can you do to increase your total utility from consumption of music downloads and Red Bull?

You can increase your consumption of Red Bull