Question 1

In their surveys of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler found that

Accepted Answer

According to the surveys conducted by Daniel Kaheman, Jack Knetsch, and Richard Thaler, most people consider it fair for firms to increase their prices following an increase in their costs, but unfair for firms to raise their prices due to an increase in demand. Therefore, option D is the correct choice.

Question 2

Economists have used the ultimatum game and the dictator game in experiments designed to determine

Accepted Answer

The ultimatum game and the dictator game are both used to study people's attitudes towards fairness and their willingness to cooperate or engage in strategic behavior. These games are commonly used in economics experiments to understand how people make decisions and what factors influence their choices. Therefore, the correct answer is A.

Question 3

Many people leave their servers tips in restaurants,even when they are not likely to visit the restaurant again.This is evidence that

Accepted Answer

This behavior suggests that people are willing to treat others fairly even if it means making a financial sacrifice. It is not necessarily indicative of their preferences for restaurant dining or changes in the industry.

Question 4

Maurice Allais,Reinhard Selten and Vernon Smith all were awarded the Nobel Prize in Economics in part because

Accepted Answer

Maurice Allais, Reinhard Selten, and Vernon Smith were all recognized for their contributions to experimental economics, which involves testing economic theories in controlled laboratory settings. Their work has expanded our understanding of how individuals and markets behave, and has led to the development of new economic theories and models.

Question 5

All but one of the following have been suggested by some economists as possible consequences of path dependency and switching costs.Which of the following is not a possible consequence of path dependency and switching costs?

Accepted Answer

The answer of All but one of the following have...

Question 6

Results of the ultimatum game indicate that most people value fairness enough that they will refuse to participate in a transaction they consider unfair,even if they are worse off financially as a result.

Accepted Answer

The statement accurately reflects the findings from research on the ultimatum game.

Question 7

________ is an experiment that tests the significance of fairness in consumer decision making.

Accepted Answer

The ultimatum game is an experiment used to test the significance of fairness in consumer decision making. In this game, one player (the proposer) is given a sum of money and must offer a portion of it to the second player (the responder). The responder must then decide whether to accept the offer or reject it. If they reject the offer, neither player receives any money. This experiment helps researchers understand how consumers value fairness and how it affects their decision-making.

Question 8

Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping.A logical reason for this is that the decline in fuel prices ________ the supply of airline tickets while at the same time the demand for airline tickets ________,so airline ticket prices still increased.

Accepted Answer

The answer of Many airlines have not reduced or eliminated...

Question 9

The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.

Accepted Answer

The ultimatum game and the dictator game are often used in economic experiments to test the role of fairness in decision-making, specifically in terms of how people make choices about the distribution of resources.

Question 10

Some economists have suggested that network externalities result in consumers being locked into the use of products with inferior technologies.Economists Stan Leibowitz and Stephen Margolis have studied cases that have been cited as examples of this and found

Accepted Answer

Economists Leibowitz and Margolis have found that there is no convincing evidence that alternative technologies were superior in cases where network externalities resulted in consumers being locked into using products with inferior technologies.

Question 11

Studies on consumer behavior have found that most people value fairness enough that they will refuse to participate in transactions they consider unfair,even if they are worse off as a result.How does this affect a firm's decision to raise prices in the event of a temporary increase in demand?

Accepted Answer

The answer of Studies on consumer behavior have found that...

Question 12

In an experiment that employed the dictator game,economists at Cornell University gave student "allocators" the option of dividing $20 in only two ways (a)$18 for themselves and $2 to another student,or (b)$10 for themselves and $10 to another student.What was one result from this experiment?

Accepted Answer

The experiment was designed to test whether the allocators would act selfishly or fairly. The fact that most of them chose to divide the money evenly between themselves and the other student (option b) suggests that they valued fairness. Option a would have allowed them to keep more money for themselves, but they chose not to do so. Therefore, option D is the best answer. The other answer choices are either incorrect or not supported by the information in the passage.

Question 13

Explain the concept of network externalities.

Accepted Answer

The answer of Explain the concept of network externalities....

Question 14

The quantity demanded of tickets to the Super Bowl is always greater than the than the quantity supplied.Which of the following in the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?

Accepted Answer

The answer of The quantity demanded of tickets to the...

Question 15

Some economists have argued that path dependence and switching costs can lead to market failure.Which of the following is an example of this argument?

Accepted Answer

This scenario illustrates path dependence and switching costs leading to market failure. Despite having superior technology, the Betamax recorders lost the market share to VHS due to the higher switching costs involved in switching to a new technology. Consumers had already invested in VHS tapes and players, making it difficult for them to switch to a new format. This led to the failure of Betamax in the market, despite its superior technology.

Question 16

In a survey of consumers,Daniel Kaheman,Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to

Accepted Answer

The survey shows that 82 percent of consumers believe that raising the price of snow shovels following a snowstorm is unfair. This indicates that consumers have a strong perception of price gouging and it may not be a good business decision to raise prices in such situations.

Question 17

During its run on Broadway,the play The Producers regularly sold out all available tickets at the St.James Theater.The theater could have raised ticket prices from $75 to $125 and still sold all available tickets but chose not to do so.The best explanation for this decision is

Accepted Answer

This decision is an example of sacrificing short-run profits for the long-term benefit of customer satisfaction, which can lead to increased profits in the future. By keeping ticket prices lower, the theater is able to maintain a positive relationship with its customers and potentially generate more revenue through repeat business and positive word-of-mouth promotion.

Question 18

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

Accepted Answer

The answer of A network externality causes firms to sacrifice...

Question 19

All but one of the following economists were awarded a Nobel prize for their contributions to experimental economics and their explorations of the influence fairness has on consumer decision-making.Which economist did not receive a Nobel Prize for this work?

Accepted Answer

Alan Krueger was not awarded a Nobel Prize for his work in experimental economics and fairness influences on consumer decision-making. The other three economists, Vernon Smith, Daniel Kahneman, and Maurice Allais, all received Nobel Prizes for their contributions to this field of study.

Question 20

Economists have noted that businesses of a certain type tend to congregate geographically,attracting workers with skills in those fields.This,in turn,lures more firms seeking employees with those skills.Some examples include commercial banking,software development,and the automobile industry.What mechanism is at work here? Briefly explain how the mechanism works to the advantage of employers and employees.

Accepted Answer

The answer of Economists have noted that businesses of a...

Quiz 10: Consumer Choice and Behavioral Economics