Question 1

Figure 10-4 
-Refer to Figure 10-4. Best friends Laurel and Hardy, both enjoy watching romantic comedies and science fiction movies. Based on the diagrams above what can you conclude about their movie preferences?

Accepted Answer

The answer of Figure 10-4 
-Refer to Figure 10-4. Best...

Question 2

Figure 10-5 
-Refer to Figure 10-5. What is the marginal rate of substitution for one bar of chocolate between g and h?

Accepted Answer

The answer of Figure 10-5 
-Refer to Figure 10-5. What...

Question 3

A sunk cost is a cost that has already been paid and cannot be recovered.

Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered. Therefore, it is important for decision makers to not let sunk costs influence future decisions.

Question 4

Some online penny auctions charge a fee, such as $1, for every bid placed. Why should these costs of $1 per bid be considered sunk costs? Would it be smart for someone who has "already invested $5 in bidding costs" to keep bidding to "protect his or her sunk investments"? Why or why not?

Accepted Answer

The answer of Some online penny auctions charge a fee,...

Question 5

What is an indifference curve?

Accepted Answer

An indifference curve is a curve that shows the combinations of consumption bundles that give the consumer the same level of satisfaction or utility. Therefore, the best choice is B as it correctly defines an indifference curve. The other options are incorrect because they describe different economic concepts such as marginal utility (A), consumer preferences (C), and tradeoffs (D).

Question 6

Behavioral economists examine choices that consumers make that are not economically rational. Economists generally assume that people are rational; that is, they weigh the benefits and costs of an action and choose an action only if the benefits outweigh the costs. Why do consumers not act rationally when the result is that they make themselves worse off?

Accepted Answer

The answer of Behavioral economists examine choices that consumers make...

Question 7

If preferences are transitive, indifference curves

Accepted Answer

The answer of If preferences are transitive, indifference curves
...

Question 8

Why do many film processing companies have a policy of printing every picture on a roll of film or a memory card, even if the picture is very fuzzy and customers are allowed to ask for refunds on any pictures they do not like?

Accepted Answer

The answer of Why do many film processing companies have...

Question 9

If Dawson prefers pizza to hamburgers and hamburgers to hot dogs, then if preferences are transitive

Accepted Answer

If Dawson prefers pizza to hamburgers and hamburgers to hot dogs, then according to transitivity, she must prefer pizza to hot dogs. Therefore, option B is the correct answer. Options A, C, and D are incorrect as they do not follow the transitive property of preferences.

Question 10

Molly received an autographed poster of David Hasselhoff for her 21st birthday. Her friend Helga offered her $50 for the poster, but Molly refused to sell the poster even though she knows she would never pay that much to replace it if it was ever damaged or destroyed. Explain this inconsistency in Molly's behavior.

Accepted Answer

The answer of Molly received an autographed poster of David...

Question 11

Behavioral economics is the study of situations in which people make rational choices.

Accepted Answer

Behavioral economics is the study of situations in which people make irrational or inconsistent choices, often due to cognitive biases and emotional factors.

Question 12

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

Accepted Answer

The statement accurately describes the endowment effect.

Question 13

One reason college students do not study enough to get high grades is that they are unrealistic about their future behavior.

Accepted Answer

Many college students believe they will change their study habits in the future and still achieve good grades without putting in the necessary effort. This unrealistic belief can lead to poor academic performance.

Question 14

Explain the endowment effect.

Accepted Answer

The answer of Explain the endowment effect....

Question 15

A common mistake made by consumers is the failure to take into account the monetary costs of their actions.

Accepted Answer

The answer of A common mistake made by consumers is...

Question 16

One possible reason as to why consumers respond to sales is that by displaying a "high" regular price and a "low" sale price, sales provide consumers with a reference point to interpret the prices being offered.

Accepted Answer

Sales give consumers a reference point to compare prices, which can make the sale price seem like a better deal. This psychological effect is known as "anchoring and adjustment."

Question 17

What is the marginal rate of substitution?

Accepted Answer

The answer of What is the marginal rate of substitution?
...

Question 18

Figure 10-4 
-Refer to Figure 10-4. Best friends Laurel and Hardy both enjoy watching romantic comedies and science fiction movies. Based on the diagrams above what can you conclude about their movie preferences?

Accepted Answer

The answer of Figure 10-4 
-Refer to Figure 10-4. Best...

Question 19

A construction project in Congressman Foghorn's district is unfinished. Foghorn has asked that a new appropriations bill include funds to complete the project, despite a report by an independent agency that the project is a waste of taxpayer money. Foghorn's project is a bridge that crosses a river between two cities in his district. The press has criticized Foghorn and dubbed the project "a bridge too far" since another bridge, located closer to the same two cities Foghorn's bridge will connect, already exists and can accommodate all traffic between the two cities. Foghorn argues that if the bridge project is not completed, the $50 million already spent will have been wasted. Is Foghorn's argument economically rational? Explain your answer.

Accepted Answer

The answer of A construction project in Congressman Foghorn's district...

Question 20

The slope of an indifference curve

Accepted Answer

The slope of an indifference curve measures the marginal rate of substitution (MRS) between the two goods in question, which is the rate at which a consumer is willing to trade one good for another while remaining at the same level of utility. Choices A and D involve calculating ratios that are not equivalent to the slope of an indifference curve, and Choice B refers to a different concept (total utility instead of marginal utility).

Quiz 10: Consumer Choice and Behavioral Economics

Figure 10-4 -Refer to Figure 10-4. Best friends Laurel and Hardy, both enjoy watching romantic comedies and science fiction movies. Based on the diagrams above what can you conclude about their movie preferences?

Figure 10-5 -Refer to Figure 10-5. What is the marginal rate of substitution for one bar of chocolate between g and h?