Question 1

-Refer to Figure 6-4. The consumer can afford consumption bundles

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-Refer to Figure 6-4. The consumer can...

Question 2

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

Accepted Answer

Many students may have unrealistic expectations about their ability to balance academic and social demands, procrastinate too much, or believe they can cram for exams and still achieve high grades. These behaviours can lead to not enough studying, resulting in lower grades.

Question 3

Explain the endowment effect.

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Question 4

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

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Question 5

The absolute value of the slope of the budget constraint is equal to

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Question 6

Behavioural 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?

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Question 7

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?

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Question 8

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

By displaying a higher regular price, consumers have a point of comparison to interpret the lower sale price as a good deal or discount. This can create a sense of urgency and encourage consumers to make a purchase. Therefore, sales can be an effective marketing strategy for driving consumer behavior.

Question 9

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. This means that the consumer is indifferent or equally satisfied between any two points on the same curve. Therefore, option B is the correct choice. Option A is incorrect because it refers to a utility curve, which is a different concept. Option C is partly correct, but it is not the best choice because while it does show the consumer's preference, it only does so in terms of the level of satisfaction or utility. Option D is incorrect because it refers to a budget constraint curve, which is also a different concept.

Question 10

A consumer's utility-maximising combination of goods is given by the bundle that corresponds to the point on

Accepted Answer

The consumer's utility is maximized at the point where the indifference curve is tangent to the budget constraint. This is because at this point, the marginal rate of substitution (MRS) between the two goods is equal to the ratio of their prices, which is the condition for utility-maximization. Therefore, option C is the correct answer. Options A, B and D do not necessarily correspond to the optimal bundle.

Question 11

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 and still remain on the same indifference curve. Choices A and D are incorrect as they refer to the price and quantity of the goods, which are not directly related to the slope of the indifference curve. Choice B is incorrect as the slope of the indifference curve does not measure total utility, but rather the rate at which the consumer is willing to substitute one good for another.

Question 12

-Refer to Figure 6-3. The Bobsey twins, 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?

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-Refer to Figure 6-3. The Bobsey twins,...

Question 13

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?

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Question 14

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

Accepted Answer

Behavioural economics is the study of situations in which people make choices that deviate from rationality, such as making decisions that are influenced by emotions, biases, and heuristics.

Question 15

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

Accepted Answer

If preferences are transitive, and Dawson prefers pizza to hamburgers and hamburgers to hot dogs, she must prefer pizza to hot dogs. This is because if A > B and B > C, then A > C (in this case, pizza > hamburgers and hamburgers > hot dogs implies pizza > hot dogs). Therefore, she cannot be indifferent among the three items (A is false), and both C and D are possibilities, but B must be true.

Question 16

-Refer to Figure 6-3. 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?

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-Refer to Figure 6-3. Best friends Laurel...

Question 17

-Refer to Figure 6-4. Which of the following statements is true?

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-Refer to Figure 6-4. Which of the...

Question 18

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, regardless of any future decisions or actions. It is irrelevant to the decision-making process going forward.

Question 19

If preferences are transitive, indifference curves

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...

Question 20

What is the marginal rate of substitution?

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Quiz 6: Concumer Choice and Behavioural Economics