Question 1

Refer to the graph shown. Given this budget constraint, if bagels cost $1.80 each, croissants must cost:

Accepted Answer

The answer of Refer to the graph shown. Given this...

Question 2

Refer to the following graph.  An indifference curve with a constant marginal rate of substitution is shown by:

Accepted Answer

The answer of Refer to the following graph.  An...

Question 3

The absolute value of the slope of the indifference curve given the law of diminishing marginal rate of substitution:

Accepted Answer

The answer of The absolute value of the slope of...

Question 4

Refer to the graph shown.  Assuming a consumer has $5 to spend, if a soda costs $0.50 and a chocolate bar costs $0.50, the consumer will optimally choose to consume:

Accepted Answer

The answer of Refer to the graph shown.  Assuming...

Question 5

Behavioral economics:

Accepted Answer

Behavioral economics examines the assumptions of traditional economic models by incorporating insights from psychology to understand how people actually make decisions, often challenging the notion of fully rational behavior.

Question 6

Refer to the graph shown.  Assuming a consumer has $5 to spend, if a soda costs $0.25 and a chocolate bar costs $0.50, the consumer will optimally choose to consume:

Accepted Answer

The answer of Refer to the graph shown.  Assuming...

Question 7

Economists have been interested in the following interaction: A person is allowed to split a sum of money between himself and another person. The other person can then accept the split or reject it, in which case neither person gets anything. Economists call this interaction the:

Accepted Answer

The answer of Economists have been interested in the following...

Question 8

When people play the "ultimatum game," in which one person gets to decide how to split a sum of money by offering a share to another person and neither gets anything if the second person rejects the offer, the result is often that the first person offers:

Accepted Answer

In the ultimatum game, the first person typically offers something close to 50-50, and the second person accepts this offer. This is because the first person knows that if they offer too little, the second person will reject the offer and neither person will get anything. The second person knows that if they reject the offer, they will get nothing, so they are willing to accept even a small offer.

Question 9

The slope of a budget constraint with combinations of cookies that cost $1 a cookie and milk that costs $0.50 a carton (with cookies on the y-axis and milk on the x-axis) is:

Accepted Answer

The answer of The slope of a budget constraint with...

Question 10

Refer to the following graph. If the price of bagels falls, the budget constraint in the graph will rotate:

Accepted Answer

The answer of Refer to the following graph. If the...

Question 11

Joseph Gallo poured two glasses of wine from the same bottle but put a more expensive price tag on one glass than on the other. He let people test both and asked them which they wanted, and most wanted the more expensive glass, not knowing that both had come from the same bottle. This result indicates that firms should:

Accepted Answer

Consumers often associate higher prices with higher quality, so lowering prices might lead them to perceive the product as lower quality.

Question 12

The status quo bias implies that:

Accepted Answer

The status quo bias suggests that individuals tend to prefer the current state of affairs or the default option, influencing their decisions to maintain the existing situation.

Question 13

The message of the ultimatum game is that:

Accepted Answer

The ultimatum game shows that people often reject offers they perceive as unfair, even at a cost to themselves, indicating that fairness can outweigh pure self-interest.

Question 14

A rational consumer maximizes his or her:

Accepted Answer

A rational consumer aims to maximize total utility, which is the overall satisfaction or benefit derived from consuming goods and services.

Question 15

Experiments based on the "ultimatum game" indicate that people are generally:

Accepted Answer

Experiments with the ultimatum game show that people often reject offers they perceive as unfair, even if it means they receive nothing, indicating they value fairness over maximizing monetary gain.

Question 16

As a consumer moves along an indifference curve:

Accepted Answer

An indifference curve represents combinations of goods that provide the consumer with the same level of utility, meaning total utility is constant along the curve. Prices, quantities, and the consumer's budget can change as long as the consumer remains on the same indifference curve.

Question 17

Behavioral economists have found that people are more willing to save if saving is the default option, as in the case in which they have to opt out of an automatic payroll deduction savings plan. Economists call this:

Accepted Answer

The status quo bias refers to the preference for the current state of affairs, where people are more likely to stick with a default option rather than change it, such as opting out of a savings plan.

Question 18

Joseph Gallo poured two glasses of wine from the same bottle but put a more expensive price tag on one glass than on the other. He let people test both and asked which they wanted; most wanted the more expensive glass, not knowing that both had come from the same bottle. This kind of experiment tells us that:

Accepted Answer

This experiment suggests that people may be influenced by perceived value and social factors, such as price, rather than just the intrinsic qualities like taste, indicating a preference for the sense of indulgence.

Question 19

Refer to the graph shown. Which price combination is consistent with the budget line shown?

Accepted Answer

The answer of Refer to the graph shown. Which price...

Question 20

As a consumer moves along a budget constraint:

Accepted Answer

As a consumer moves along a budget constraint, both prices and income are held constant, and only the quantities of goods consumed change.

Quiz 19: The Logic of Individual Choice: the Foundation of Supply and Demand