Question 1

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 may have unrealistic expectations about their future behavior, thinking that they will be able to cram for exams or complete assignments last minute and still achieve high grades. This can lead to a lack of motivation to study and prepare adequately, which can negatively impact their academic performance.

Question 2

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 3

What is the marginal rate of substitution?

Accepted Answer

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

Question 4

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 5

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

Accepted Answer

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

Question 6

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 7

Figure 10-3 
-Refer to Figure 10-3. 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?

Accepted Answer

The answer of Figure 10-3 
-Refer to Figure 10-3. Best...

Question 8

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 true that it cannot be recovered.

Question 9

If preferences are transitive, indifference curves

Accepted Answer

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

Question 10

What is an indifference curve?

Accepted Answer

An indifference curve shows the combinations of consumption bundles that give the consumer the same level of utility. Therefore, the best choice for a consumer is any point on the highest possible indifference curve, as it represents the highest level of utility attainable from the available options.

Question 11

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 12

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 use a reference point of a higher regular price to make the sale price seem lower, which can influence consumer behavior.

Question 13

Figure 10-4 
-Refer to Figure 10-4. What is the marginal rate of substitution between g and h?

Accepted Answer

The marginal rate of substitution between g and h is the absolute value of the slope of the indifference curve passing through point G on the X-axis and point H on the Y-axis. This slope is dH/dG = (4-2)/(2-1) = 2 cookies. Therefore, the best choice is point B, where the slope of the budget constraint is equal to the marginal rate of substitution.

Question 14

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 by transitivity she must prefer pizza to hot dogs. This is the only conclusion that can be drawn with certainty.

Question 15

The slope of an indifference curve

Accepted Answer

The slope of an indifference curve measures the rate at which a consumer is willing to substitute one good for another while remaining on the same level of utility. This is referred to as the marginal rate of substitution (MRS) and is calculated by dividing the change in the quantity of one good by the change in the quantity of the other good. Therefore, choice C is the correct answer.

Question 16

Figure 10-3 
-Refer to Figure 10-3. 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?

Accepted Answer

The answer of Figure 10-3 
-Refer to Figure 10-3. The...

Question 17

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 18

Figure 10-4 
-Refer to Figure 10-4. What is the marginal rate of substitution between h and j?

Accepted Answer

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

Question 19

A consumer's utility-maximizing 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 point represents the highest level of satisfaction the consumer can achieve given their budget constraint. Points A and B do not necessarily represent maximum utility, and D only represents a point where the budget constraint intersects an axis, which does not necessarily correspond to the consumer's utility-maximizing bundle.

Question 20

Explain the endowment effect.

Accepted Answer

The answer of Explain the endowment effect....

Quiz 10: Consumer Choice and Behavioral Economics