Question 1

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 often create a contrast effect, where the regular price acts as a reference point and the sale price seems like a great deal in comparison. This can motivate consumers to make a purchase they might not have otherwise made at the regular price.

Question 2

Figure 6-3 
-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?
A)They have identical movie preferences.
B)Laurel enjoys romantic comedies more than Hardy.
C)Laurel enjoys science fiction movies more than Hardy.
D)The diagrams do not provide any information about relative preferences.

Accepted Answer

The answer of Figure 6-3 
-Refer to Figure 6-3.The Bobsey...

Question 3

The slope of an indifference curve
A)is calculated by dividing the price of the good on the vertical axis by price of the good on the horizontal axis.
B)measures total utility.
C)measures the marginal rate of substitution between the two goods in question.
D)is calculated by dividing the quantity of the good on the vertical axis by the quantity of the good on the horizontal axis.

Accepted Answer

The slope of an indifference curve measures the marginal rate of substitution between the two goods in question. It shows the rate at which a consumer is willing to trade one good for another while remaining on the same level of utility.

Question 4

What is an indifference curve?
A)It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods.
B)It is a curve that shows the combinations of consumption bundles that give the consumer the same utility.
C)It is a curve that shows a consumer's preference for various consumption bundles.
D)It is a curve that shows the trade-off a consumer faces among different combinations of consumption bundles.

Accepted Answer

An indifference curve is a curve that shows the combinations of consumption bundles that give the consumer the same utility. This means that any point on the curve provides the consumer with the same level of satisfaction or utility. Therefore, choice B is the correct answer.

Question 5

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 6

Figure 6-3 
-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?
A)They have identical movie preferences.
B)Hardy enjoys romantic comedies more than Laurel.
C)Hardy enjoys science fiction movies more than Laurel.
D)The diagrams do not provide any information about relative preferences.

Accepted Answer

The answer of Figure 6-3 
-Refer to Figure 6-3.Best friends...

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?

Accepted Answer

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

Question 8

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 do not always make rational choices due to cognitive biases, social and emotional factors, and other psychological influences.

Question 9

If Dawson prefers pizza to hamburgers and hamburgers to hot dogs,and if preferences are transitive,
A)at times she could be indifferent among the three items.
B)she must prefer pizza to hot dogs.
C)she could prefer hamburgers to pizza on some occasions but not hot dogs to pizza.
D)she could prefer hot dogs to pizza on some occasions but not hamburgers to hot dogs.

Accepted Answer

If preferences are transitive (meaning if A is preferred over B and B is preferred over C, then A is preferred over C), and Dawson prefers pizza to hamburgers and hamburgers to hot dogs, then it follows that she must prefer pizza to hot dogs.

Question 10

If preferences are transitive,indifference curves
A)intersect at the equilibrium consumption bundle.
B)intersect at the optimum consumption bundle.
C)intersect where the marginal rate of substitution for each indifference curve is equal.
D)do not intersect.

Accepted Answer

The answer of If preferences are transitive,indifference curves
A)intersect at the...

Question 11

Explain the endowment effect.

Accepted Answer

The answer of Explain the endowment effect....

Question 12

The absolute value of the slope of the budget constraint is equal to
A)the marginal rate of substitution between the two goods in question.
B)the price of the good on the vertical axis divided by the price of the good on the horizontal axis.
C)the price of the good on the horizontal axis divided by the price of the good on the vertical axis.
D)quantity of the good on the vertical axis divided by the quantity of the good on the horizontal axis.

Accepted Answer

The answer of The absolute value of the slope of...

Question 13

Figure 6-4 
-Refer to Figure 6-4.The consumer can afford consumption bundles
A)r,s,t and u.
B)r,s,v and u.
C)s,v and u only.
D)s,v,t and u.

Accepted Answer

The answer of Figure 6-4 
-Refer to Figure 6-4.The consumer...

Question 14

Figure 6-4 
-Refer to Figure 6-4.Which of the following statements is true?
A)The consumer gets more utility from bundle r than from bundle v.
B)The consumer gets less utility from bundle w than from bundle v.
C)Bundles r,s,t and u all cost the same.
D)Bundles r and w are not affordable.

Accepted Answer

The answer of Figure 6-4 
-Refer to Figure 6-4.Which of...

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

Accepted Answer

Many students underestimate the amount of work and effort required to achieve high grades and assume they will be able to make up for it later on. However, this attitude often leads to poor performance and missed opportunities for academic success.

Question 17

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?

Accepted Answer

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

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 future decisions or actions.

Question 19

What is the marginal rate of substitution?
A)the price ratio
B)the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market
C)the rate at which the consumer is willing to trade one good for another so that she increases her utility
D)the rate at which the consumer is willing to trade one good for another without any loss in utility

Accepted Answer

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

Question 20

A consumer's utility-maximising combination of goods is given by the bundle that corresponds to the point on
A)the indifference curve that intersects the horizontal axis.
B)the indifference curve that intersects the vertical axis.
C)an indifference curve that is tangent to the budget constraint.
D)the budget constraint where it intersects one of the axes.

Accepted Answer

A consumer's utility-maximizing combination of goods is given by the point where the budget constraint is tangent to the highest possible indifference curve. At this point, the consumer is getting the most satisfaction possible given their budgetary constraints. Therefore, choice C - an indifference curve that is tangent to the budget constraint - is the correct answer. Choices A, B, and D do not necessarily lead to the utility-maximizing combination of goods.

Quiz 6: Consumer Choice and Behavioural Economics

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.

Figure 6-3 -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?

The slope of an indifference curve

What is an indifference curve?

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?

Figure 6-3 -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?

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?

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

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

If preferences are transitive,indifference curves

Explain the endowment effect.

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

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

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

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

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

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

What is the marginal rate of substitution?

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