Question 1

Logan has $20 and is trying to decide between tubs of ice-cream and bars of chocolate. Each tub of ice-cream is worth $10 while each bar of chocolate is worth $5. Logan calculates that if he consumes an entire tub of ice-cream then he will gain an extra 30 units of utility, while if he consumes a bar of chocolate then he will get an extra 15 units of utility. If Logan is only interested in maximizing his utility, which of the following statements cannot be correct?
A) Logan should buy two tubs of ice-cream.
B) Logan should buy four bars of chocolate.
C) Logan should buy one tub of ice-cream and two bars of chocolate.
D) Logan should buy one tub of ice-cream and one bar of chocolate.

Accepted Answer

The answer of Logan has $20 and is trying to...

Question 2

Julia consumes two goods X and Y. Her current consumption pattern is such that, while she is operating on her budget constraint, her marginal utility per dollar of X is greater than that per dollar of Y. Which of the following statements is true?
A) In order to maximize her utility, Julia should consume less X and more Y.
B) Julia is operating at a point on her budget constraint that lies below and to the right (to the south-east) of the point of tangency between her budget constraint and the highest possible indifference curve.
C) Julia is operating at a point on her budget constraint that lies above and to the left (to the north-west) of the point of tangency between her budget constraint and the highest possible indifference curve.
D) Julia is operating at a point where her budget constraint is tangent to the highest possible indifference curve.

Accepted Answer

Given that Julia's marginal utility per dollar of X is greater than that per dollar of Y, she is not maximizing her utility. To maximize utility, the marginal utility per dollar spent on each good should be equal. This means she should consume more of Y and less of X to reach the point where her budget constraint is tangent to the highest possible indifference curve. The description of her current consumption pattern indicates she is to the north-west of this tangency point, as she has not yet reallocated her budget to equalize the marginal utility per dollar between X and Y.

Question 3

Julia consumes two goods X and Y. Her current consumption pattern is such that, while she is operating on her budget constraint, her marginal utility per dollar of Y is greater than that per dollar of X. Which of the following statements is true?
A) In order to maximize her utility, Julia should consume more X and less Y.
B) Julia is operating at a point on her budget constraint that lies below and to the right (to the south-east) of the point of tangency between her budget constraint and the highest possible indifference curve.
C) Julia is operating at a point on her budget constraint that lies above and to the left (to the north-west) of the point of tangency between her budget constraint and the highest possible indifference curve.
D) Julia is operating at a point where her budget constraint is tangent to the highest possible indifference curve.

Accepted Answer

Julia is operating at a point on her budget constraint that lies below and to the right (to the south-east) of the point of tangency between her budget constraint and the highest possible indifference curve. This is because her marginal utility per dollar of Y is greater than that per dollar of X, which means that she can increase her utility by consuming more Y and less X.

Question 4

Julia consumes two goods X and Y. Each good costs $5 per unit. She has a budget of $40 at her disposal that she intends to spend on the two goods. Julia thinks she is currently maximizing her utility and operating at a point of tangency between her budget constraint and an indifference curve. She is currently consuming 3 units each of X and Y. Which of the following statements is true?
A) Julia is maximizing her utility.
B) Julia is operating at a point on her budget constraint that lies below and to the right (to the south-east) of the point of tangency between her budget constraint and the highest possible indifference curve.
C) Julia is operating at a point on her budget constraint that lies above and to the left (to the north-west) of the point of tangency between her budget constraint and the highest possible indifference curve.
D) Julia is not maximizing her utility and is operating at a point inside her opportunity set.

Accepted Answer

The answer of Julia consumes two goods X and Y....

Question 5

Vivian consumes two goods X and Y. Her current consumption pattern is such that, while she is operating on her budget constraint, her marginal utility per dollar of X is less than that per dollar of Y. Which of the following statements is true?
A) Vivian is operating at a point on her budget constraint that lies below and to the right (to the south-east) of the point of tangency between her budget constraint and the highest possible indifference curve.
B) In order to maximize her utility, Vivian should consume more X and less Y.
C) Vivian is operating at a point on her budget constraint that lies above and to the left (to the north-west) of the point of tangency between her budget constraint and the highest possible indifference curve.
D) Vivian is operating at a point where her budget constraint is tangent to the highest possible indifference curve.

Accepted Answer

CWhen the marginal utility per dollar of X is less than that per dollar of Y, it means Vivian is getting less satisfaction per dollar spent on X compared to Y. To maximize utility, she should reallocate her spending towards Y and away from X until the marginal utilities per dollar are equalized. This situation indicates she is not at the optimal point of consumption (the tangency point between her budget constraint and the highest possible indifference curve). Choices A and C describe positions on the budget constraint that are not at this optimal point, reflecting the imbalance in marginal utilities per dollar.

Question 6

Vivian consumes two goods X and Y. Her current consumption pattern is such that, while she is operating on her budget constraint, her marginal utility per dollar of Y is less than that per dollar of X. Which of the following statements is true?
A) Vivian is operating at a point on her budget constraint that lies below and to the right (to the south-east) of the point of tangency between her budget constraint and the highest possible indifference curve.
B) In order to maximize her utility, Vivian should consume more Y and less X.
C) Vivian is operating at a point on her budget constraint that lies above and to the left (to the north-west) of the point of tangency between her budget constraint and the highest possible indifference curve.
D) Vivian is operating at a point where her budget constraint is tangent to the highest possible indifference curve.

Accepted Answer

The answer of Vivian consumes two goods X and Y....

Question 7

Vivian consumes two goods X and Y. Her current consumption pattern is such that, while she is operating on her budget constraint, her marginal utility per dollar of X is equal to that per dollar of Y. Which of the following statements is true?
A) Vivian is operating at a point on her budget constraint that lies below and to the right (to the south-east) of the point of tangency between her budget constraint and the highest possible indifference curve.
B) In order to maximize her utility, Vivian should consume more X and less Y.
C) Vivian is operating at a point on her budget constraint that lies above and to the left (to the north-west) of the point of tangency between her budget constraint and the highest possible indifference curve.
D) Vivian is operating at a point where her budget constraint is tangent to the highest possible indifference curve.

Accepted Answer

When the marginal utility per dollar spent on two goods is equal, it means that the consumer is maximizing utility given their budget constraint. This condition is met at the point of tangency between the budget constraint and the highest possible indifference curve.

Question 8

Gisella states that in a head-to-head match-up she preferred Elizabeth Warren over Bernie Sanders; Bernie Sanders over Joe Biden but in a match-up between Joe Biden and Elizabeth Warren, she preferred Joe Biden over Elizabeth Warren. Based on this, you would conclude that:
A) Gisella's preferences violate the principle of transitivity.
B) Gisella is politically naïve.
C) Gisella has fallen prey to the conjunction fallacy.
D) Gisella is suffering from hind-sight bias.

Accepted Answer

Gisella's preferences are inconsistent and violate the principle of transitivity, which states that if a person prefers A over B and B over C, then they should prefer A over C. However, Gisella prefers Elizabeth Warren over Bernie Sanders, Bernie Sanders over Joe Biden, but then prefers Joe Biden over Elizabeth Warren, which is not transitive.

Question 9

Jason consumes two goods X and Y. Jason is a rational consumer who wishes to maximize his utility subject to his budget constraint. Jason's preferences are such that he gets the same marginal utility from Good X per dollar of X as the marginal utility from Good Y per dollar of Y. So effectively the slope of his "indifference curves" is the same as the slope of his budget constraint. On the basis of this information, you can conclude that:
A) Jason's utility maximizing consumption bundle is indeterminate; he can choose to consume only Good X or only Good X or any combination of the two goods that lie on the budget constraint.
B) In order to maximize his utility, Jason should consume only Good X and zero of Good Y.
C) In order to maximize his utility, Jason should consume only Good Y and zero of Good X.
D) In order to maximize his utility, Jason should consume less of both goods.

Accepted Answer

When a consumer's marginal utility per dollar spent on each good is equal, it means they are optimizing their utility given their budget constraint. This condition is known as the equi-marginal principle and indicates that the consumer has balanced their spending on both goods to achieve maximum satisfaction. Therefore, any combination of the two goods that lies on the budget constraint could potentially maximize Jason's utility, making the utility-maximizing consumption bundle indeterminate without further information.

Question 10

The emotional problems experienced by Henry Gage and Damasio's patient Elliott were caused by damage to which part of the brain?
A) The pre-frontal cortex.
B) Nucleus Accumbens (NAcc)
C) Dopamine receptors.
D) Ventral tegmental area (VTA)

Accepted Answer

Both Henry Gage and Damasio's patient Elliott experienced emotional problems due to damage to the pre-frontal cortex, which plays a crucial role in decision-making, social behavior, and emotional regulation.

Question 11

Which part of the brain houses the "reward centre"?
A) The pre-frontal cortex.
B) Nucleus Accumbens (NAcc).
C) Dopamine receptors.
D) Ventral tegmental area (VTA)
Short essay questions:

Accepted Answer

The Nucleus Accumbens (NAcc) is a part of the brain that is involved in the reward system. It is responsible for the feelings of pleasure and satisfaction that we get from certain activities, such as eating, drinking, and sex.

Question 12

Briefly describe the difference between economics and psychology in their approaches to decision making.

Accepted Answer

The answer of Briefly describe the difference between economics and...

Question 13

Briefly explain what is meant by "ego depletion theory".

Accepted Answer

The answer of Briefly explain what is meant by "ego...

Question 14

Consider the guessing game where people are choosing numbers between 0 and 100. Choices must be in integers. The aim is to come as close as possible to (1/2) of the average number chosen in the group. Briefly explain the basic idea of the "cognitive hierarchy" model. Define Level Zero thinking as one where everyone picks 100. Explain what you would pick if you thought that everyone in the group will apply two levels of thinking.

Accepted Answer

The answer of Consider the guessing game where people are...

Question 15

Consider the guessing game where people are choosing numbers between 0 and 100. The aim is to come as close as possible to (2/3) of the average number chosen in the group. Define Level Zero thinking as one where everyone chooses 100, so that the average is 100 and (2/3) of the average is 50. What number should you choose if you believe that everyone will apply two levels of thinking?

Accepted Answer

The answer of Consider the guessing game where people are...

Question 16

Consider the guessing game where people are choosing numbers between 0 and 100. The aim is to come as close as possible to (2/3) of the average number chosen in the group. Define Level Zero thinking as one where everyone chooses 100, so that the average is 100 and (2/3) of the average is 67? What number should you pick if you thought that half of the group will apply Level 1 thinking and the other half would apply Level 2 thinking?

Accepted Answer

The answer of Consider the guessing game where people are...

Question 17

Ana has $100. She consumes two goods, X and Y. Good X costs $5 each and Good Y costs $10 each. Ana prefers to consume the two goods with a 2:1 ratio, that is, she prefers to have two units of X for each unit of Y. How much X and Y should she consume?

Accepted Answer

The answer of Ana has $100. She consumes two goods,...

Question 18

Ana has $100. She consumes two goods, X and Y. Both goods cost $5 each. But Ana gets two utils of utility from each extra unit of Good X while she gets 1 util of utility from each extra unit of Good Y. How much X and Y should Ana consume?

Accepted Answer

The answer of Ana has $100. She consumes two goods,...

Question 19

Ana has $100. She consumes two goods X and Y. Both goods cost $5 each. Ana's preferences are such that she gets the same amount of utility from each extra unit of X as she does from each extra unit of Y. How much X and Y should Ana consume?

Accepted Answer

The answer of Ana has $100. She consumes two goods...

Quiz 1: How We Decide

Julia consumes two goods X and Y. Her current consumption pattern is such that, while she is operating on her budget constraint, her marginal utility per dollar of X is greater than that per dollar of Y. Which of the following statements is true?

Julia consumes two goods X and Y. Her current consumption pattern is such that, while she is operating on her budget constraint, her marginal utility per dollar of Y is greater than that per dollar of X. Which of the following statements is true?

Vivian consumes two goods X and Y. Her current consumption pattern is such that, while she is operating on her budget constraint, her marginal utility per dollar of X is less than that per dollar of Y. Which of the following statements is true?

Vivian consumes two goods X and Y. Her current consumption pattern is such that, while she is operating on her budget constraint, her marginal utility per dollar of Y is less than that per dollar of X. Which of the following statements is true?

Vivian consumes two goods X and Y. Her current consumption pattern is such that, while she is operating on her budget constraint, her marginal utility per dollar of X is equal to that per dollar of Y. Which of the following statements is true?

Gisella states that in a head-to-head match-up she preferred Elizabeth Warren over Bernie Sanders; Bernie Sanders over Joe Biden but in a match-up between Joe Biden and Elizabeth Warren, she preferred Joe Biden over Elizabeth Warren. Based on this, you would conclude that:

The emotional problems experienced by Henry Gage and Damasio's patient Elliott were caused by damage to which part of the brain?

Which part of the brain houses the "reward centre"?

Briefly describe the difference between economics and psychology in their approaches to decision making.

Briefly explain what is meant by "ego depletion theory".

Ana has $100. She consumes two goods, X and Y. Good X costs $5 each and Good Y costs $10 each. Ana prefers to consume the two goods with a 2:1 ratio, that is, she prefers to have two units of X for each unit of Y. How much X and Y should she consume?

Ana has $100. She consumes two goods, X and Y. Both goods cost $5 each. But Ana gets two utils of utility from each extra unit of Good X while she gets 1 util of utility from each extra unit of Good Y. How much X and Y should Ana consume?

Ana has $100. She consumes two goods X and Y. Both goods cost $5 each. Ana's preferences are such that she gets the same amount of utility from each extra unit of X as she does from each extra unit of Y. How much X and Y should Ana consume?