Question 1

Buyers who are persuaded to take a product home to try it out,_____.

Accepted Answer

Buyers who try a product out at home may become attached to it and be less likely to return it when payment is due. This can result in the buyer having a reluctance to return the product.

Question 2

_____ is the understanding that perfect information is not likely to be available,and that as a result people make decisions that in hindsight look irrational,but in reality are the rational results of a brain that is economizing.

Accepted Answer

Bounded rationality is the idea that people make decisions based on limited information and cognitive ability. It acknowledges that people cannot process and analyze all available information, and therefore have to rely on shortcuts or heuristics to make decisions. This can lead to apparently irrational behavior, but it is actually the result of individuals trying to make the best decision with the information they have available to them.

Question 3

The principle that people would rather leave things as they are is called _____.

Accepted Answer

The phrase "status quo" refers to the existing state of affairs, and the principle that people are generally hesitant to change from that state is known as the "status quo bias." Therefore, choice A, "status quo," is the best answer.

Question 4

"Throwing good money after bad" is also known as the _____ effect.

Accepted Answer

The phrase "throwing good money after bad" refers to a situation where someone continues to invest in a failing project or venture because they have already invested so much and don't want to "lose" that sunk cost. This phenomenon is known as the sunk cost effect.

Question 5

If the price of videotapes decreases,then the _____.

Accepted Answer

When the price of a good decreases, the marginal utility per dollar of that good increases. This means that consumers will receive more satisfaction for each dollar they spend on the good. Therefore, the answer is D.

Question 6

An indifference map shows _____.

Accepted Answer

An indifference map shows a set of indifference curves for a representative consumer, which represent all combinations of two goods that provide the same level of utility. In other words, it shows the different bundles of goods that a consumer views as equally desirable, based on their level of satisfaction or utility. The table of total utility can be used to plot these different indifference curves.

Question 7

As one moves downward on an indifference curve,the:

Accepted Answer

An indifference curve represents combinations of goods that provide the same level of total satisfaction or utility to a consumer, so moving along the curve does not change total utility.

Question 8

In effect,people feel that driving is safer than flying and also prefer to do so because of _____.

Accepted Answer

The answer of In effect,people feel that driving is safer...

Question 9

The study of decision making that assumes people are rational in a broad sense,even if they do not have complete and perfect information is called _____.

Accepted Answer

Behavioral economics combines insights from psychology and economics to explore how people actually make decisions, often under conditions of uncertainty and with limited information, challenging the assumption of perfectly rational decision-making found in traditional economic theory.

Question 10

In labor markets,a change in the wage rate has both an income and a substitution effect.An increase in wages causes an increase in real income but at the same time it increases the relative price of leisure for the worker.If the increase in the wage rate causes an individual to work less:

Accepted Answer

When an increase in wages causes an individual to work less, it indicates that the income effect (which encourages more leisure as income rises) is stronger than the substitution effect (which encourages more work as the opportunity cost of leisure increases).

Question 11

Which of the following sentences based on the findings of neuroeconomics is true?

Accepted Answer

The statement about adults having greater activity in their frontal lobes and lower activity in their amygdala than do teenagers is consistent with the findings of neuroeconomics. The other statements are either incorrect or lack evidence from neuroeconomics research. For example, logical decision-making is primarily associated with the pre-frontal cortex, not the limbic system as stated in option A. Option B incorrectly suggests that emotional decision-making takes place in the pre-frontal cortex when in reality it is primarily associated with the amygdala. Option C is partially correct in that the pre-frontal cortex can sometimes override logical decision-making with emotional demands, but it is not typically associated with confusing the logical side of the brain. Lastly, option E is incorrect in that the amygdala is primarily associated with emotional responses, not logical cost-benefit analysis.

Question 12

An indifference curve shows _____.

Accepted Answer

An indifference curve is a graph showing the combinations of two goods that give the consumer the same amount of satisfaction, or utility. It represents the consumer's preferences between two goods and shows that different combinations of the two goods can provide the same level of satisfaction. The slope of the indifference curve represents the trade-off the consumer is willing to make between the two goods. A higher indifference curve indicates a higher level of satisfaction.

Question 13

The term _____ refers to the idea that the value people place on money depends on where that money comes from.

Accepted Answer

The term "mental accounting" refers to the idea that people assign different values to money depending on factors such as the source of the money or the purpose for which it will be used. For example, people might be willing to spend more money on a luxury vacation than on a necessary car repair, even if the repair costs the same amount as the vacation. This can be attributed to mental accounting, as people may value the experience of a vacation differently than the practical need for a car repair, even if the money spent is the same.

Question 14

The below indifference map shows the various combinations of hours of music and apples that yield different levels of utility. Figure 6.1 - Which of the following explains why indifference curve I₂ should not cross indifference curve I₁ as shown in Figure 6.1?

Accepted Answer

The answer of The below indifference map shows the various...

Question 15

The different combinations of any two goods that an individual can afford to purchase,given his income and prices,is shown by:

Accepted Answer

The budget line shows the different combinations of two goods that an individual can afford to purchase given his income and prices. It indicates the affordable choices for the consumer and therefore helps in making the best choice. The other options such as indifference curve, demand curve or supply curve do not provide information about affordability or budget constraints.

Question 16

The below indifference map shows the various combinations of hours of music and apples that yield different levels of utility. Figure 6.1 
- According to Figure 6.1,which of the following is incorrect?

Accepted Answer

Indifference curves should not cross each other as it violates the assumption that higher indifference curves represent higher utility levels.

Question 17

According to the concept of framing,when a customer calls a hotel regarding a reservation the hotel reservationists generally state room rates as the _____.

Accepted Answer

This is the concept of framing, where hotels generally state their highest rates during peak demand periods and then offer discounts to make it seem like a better deal.

Question 18

In an indifference map,one would most likely see indifference curves that:

Accepted Answer

Indifference curves are typically bowed inward toward the origin because of the diminishing marginal utility of goods. As a consumer acquires more of a particular good, the marginal utility of each additional unit decreases, leading to a flatter slope of the indifference curve. Therefore, choice D is the most likely option.

Question 19

The below indifference map shows the various combinations of hours of music and apples that yield different levels of utility. Figure 6.1 -According to indifference curve I₁ in Figure 6.1,for each extra apple the consumer eats,he or she must simultaneously sacrifice ____ of listening to music to keep total utility constant.

Accepted Answer

The indifference curve shows that the consumer is willing to give up 1 hour of listening to music for each extra apple they eat.

Question 20

When a good becomes more expensive,it yields less satisfaction per dollar,so consumers buy less of it and more of other goods.This is called the _____ effect.

Accepted Answer

When the price of a good increases, consumers tend to substitute it with similar goods that are relatively cheaper. This is known as the substitution effect. As a result, they end up buying less of the expensive good and more of other goods.

Quiz 6: Consumer Choice