question
Choose an amount of current spending on goods and savings so that the marginal utility per dollar of both are equal.
answer
In deciding between consuming more goods now or saving money, consumers should do which of the following?
A.
Choose an amount of current spending on goods and savings so that the marginal utility per dollar of both are equal.
B.
Weigh the additional utility they get from consumption.
C.
Allocate their spending to which of the two they like best.
D.
Choose an amount of current spending which gives them the highest total utility.
A.
Choose an amount of current spending on goods and savings so that the marginal utility per dollar of both are equal.
B.
Weigh the additional utility they get from consumption.
C.
Allocate their spending to which of the two they like best.
D.
Choose an amount of current spending which gives them the highest total utility.
question
D. lovable, funny and he has a reassuring aura.
C. too cute and cuddly to be giving insurance advice.
C. too cute and cuddly to be giving insurance advice.
answer
In an opinion survey, Snoopy was found to be the most appealing celebrity endorser. The beagle from the popular Peanuts comic strip appeared in commercials for the insurance company MetLife.
The advantages of using Snoopy are that he always appears to be
A.
boring and dull, just like an insurance sales man.
B.
aggressive and fast-talking through the advertisement.
C.
a scary and menacing dog causing fear.
D.
lovable, funny and he has a reassuring aura.
The disadvantages of using Snoopy are that he appears to be
A.
knowledgeable and wise about insurance laws.
B.
too worldly and informed on matters of life and death.
C.
too cute and cuddly to be giving insurance advice.
D.
serious and focused on his finances.
The advantages of using Snoopy are that he always appears to be
A.
boring and dull, just like an insurance sales man.
B.
aggressive and fast-talking through the advertisement.
C.
a scary and menacing dog causing fear.
D.
lovable, funny and he has a reassuring aura.
The disadvantages of using Snoopy are that he appears to be
A.
knowledgeable and wise about insurance laws.
B.
too worldly and informed on matters of life and death.
C.
too cute and cuddly to be giving insurance advice.
D.
serious and focused on his finances.
question
A. by dividing the percentage change in the quantity demanded of a product by the percentage change in the product's price
answer
How is the price elasticity of demand measured?
A.
by dividing the percentage change in the quantity demanded of a product by the percentage change in the product's price
B.
by dividing the percentage change in the product's price by the percentage change in the quantity demanded of a product
C.
by multiplying the percentage change in the product's price by the percentage change in the quantity demanded of a product
D.
Any of these methods can be used in measuring the price elasticity of demand.
A.
by dividing the percentage change in the quantity demanded of a product by the percentage change in the product's price
B.
by dividing the percentage change in the product's price by the percentage change in the quantity demanded of a product
C.
by multiplying the percentage change in the product's price by the percentage change in the quantity demanded of a product
D.
Any of these methods can be used in measuring the price elasticity of demand.
question
D. take actions that are appropriate to reach goals given available information.
answer
Economically rational means that consumers and firms
A.
are realistic about the present but not necessarily the future.
B.
take into account monetary costs but ignore nonmonetary opportunity costs.
C.
obtain full information prior to taking actions to reach goals.
D.
take actions that are appropriate to reach goals given available information.
E.
take into account monetary costs and sunk costs.
A.
are realistic about the present but not necessarily the future.
B.
take into account monetary costs but ignore nonmonetary opportunity costs.
C.
obtain full information prior to taking actions to reach goals.
D.
take actions that are appropriate to reach goals given available information.
E.
take into account monetary costs and sunk costs.
question
C.
a change in price making the good more or less expensive relative to other goods
a change in price making the good more or less expensive relative to other goods
answer
The substitution effect is the change in the quantity demanded of a good that results from ______________, holding constant the effect of the price change on consumer purchasing power.
A.
an increase in the usefulness of a product as the number of consumers who use it increases
B.
the tendency of people to be unwilling to sell something they own
C.
a change in price making the good more or less expensive relative to other goods
D.
a change in the price of a substitute for the good
A.
an increase in the usefulness of a product as the number of consumers who use it increases
B.
the tendency of people to be unwilling to sell something they own
C.
a change in price making the good more or less expensive relative to other goods
D.
a change in the price of a substitute for the good
question
D.
increase; decrease
increase; decrease
answer
The income effect causes quantity demanded to ________ when the price of a normal good decreases, and causes quantity demanded to ________ when the price of an inferior good decreases.
A.
decrease; increase
B.
increase; increase
C.
decrease; decrease
D.
increase; decrease
A.
decrease; increase
B.
increase; increase
C.
decrease; decrease
D.
increase; decrease
question
C.
situations in which people make choices that do not appear to be economically rational.
situations in which people make choices that do not appear to be economically rational.
answer
Behavioral economics is the study of
A.
social influences on decision making.
B.
the economically rational actions people take to reach their goals.
C.
situations in which people make choices that do not appear to be economically rational.
D.
fairness in decision making.
E.
obtaining information to make economically rational decisions.
A.
social influences on decision making.
B.
the economically rational actions people take to reach their goals.
C.
situations in which people make choices that do not appear to be economically rational.
D.
fairness in decision making.
E.
obtaining information to make economically rational decisions.
question
C.
ignoring nonmonetary opportunity costs, failing to ignore sunk costs, and being overly optimistic about the future.
ignoring nonmonetary opportunity costs, failing to ignore sunk costs, and being overly optimistic about the future.
answer
Three mistakes consumers often make are
A.
failing to ignore nonmonetary opportunity costs, failing to ignore sunk costs, and making decisions without full information.
B.
ignoring nonmonetary opportunity costs, failing to ignore sunk costs, and being overly pessimistic about the future.
C.
ignoring nonmonetary opportunity costs, failing to ignore sunk costs, and being overly optimistic about the future.
D.
ignoring nonmonetary opportunity costs, ignoring sunk costs, and making decisions without full information.
E.
ignoring nonmonetary opportunity costs, ignoring sunk costs, and being overly optimistic about the future.
A.
failing to ignore nonmonetary opportunity costs, failing to ignore sunk costs, and making decisions without full information.
B.
ignoring nonmonetary opportunity costs, failing to ignore sunk costs, and being overly pessimistic about the future.
C.
ignoring nonmonetary opportunity costs, failing to ignore sunk costs, and being overly optimistic about the future.
D.
ignoring nonmonetary opportunity costs, ignoring sunk costs, and making decisions without full information.
E.
ignoring nonmonetary opportunity costs, ignoring sunk costs, and being overly optimistic about the future.
question
C.
availability of close substitutes, passage of time, necessities versus luxuries, definition of the market, and share of the good in the consumer's budget.
availability of close substitutes, passage of time, necessities versus luxuries, definition of the market, and share of the good in the consumer's budget.
answer
What are the key determinants of the price elasticity of demand for a product?
The key determinants of the price elasticity of demand for a product are:
A.
whether a firm has market power, whether some consumers are willing to pay more for a product than other consumers, and ability to segment the market.
B.
competition from existing firms, threat from potential entrants, competition from substitutes, bargaining power of buyers, and bargaining power of sellers.
C.
availability of close substitutes, passage of time, necessities versus luxuries, definition of the market, and share of the good in the consumer's budget.
D.
number of firms, availability of close substitutes, and ease of firm entry and exit.
E.
government regulations, control of a key resource necessary for production, network externalities, and economies of scale.
The key determinants of the price elasticity of demand for a product are:
A.
whether a firm has market power, whether some consumers are willing to pay more for a product than other consumers, and ability to segment the market.
B.
competition from existing firms, threat from potential entrants, competition from substitutes, bargaining power of buyers, and bargaining power of sellers.
C.
availability of close substitutes, passage of time, necessities versus luxuries, definition of the market, and share of the good in the consumer's budget.
D.
number of firms, availability of close substitutes, and ease of firm entry and exit.
E.
government regulations, control of a key resource necessary for production, network externalities, and economies of scale.
question
The availability of close substitutes
answer
Which determinant is the most important?
question
A.
effective because consumers like to feel close to celebrities.
effective because consumers like to feel close to celebrities.
answer
A company is developing a new advertising campaign, and it is considering using a celebrity to endorse its product. Are celebrity endorsements effective at raising consumer demand?
Celebrity endorsements are typically
A.
effective because consumers like to feel close to celebrities.
B.
not effective because celebrities are perceived to endorse products only for money.
C.
not effective because celebrities are not considered to be particularly knowledgeable.
D.
effective because celebrities are not fashionable.
E.
not effective because social factors do not affect consumers.
Celebrity endorsements are typically
A.
effective because consumers like to feel close to celebrities.
B.
not effective because celebrities are perceived to endorse products only for money.
C.
not effective because celebrities are not considered to be particularly knowledgeable.
D.
effective because celebrities are not fashionable.
E.
not effective because social factors do not affect consumers.
question
B.
adding horizontally the individual demand curves.
adding horizontally the individual demand curves.
answer
A market demand curve is derived by
A.
adding horizontally the individual marginal utility curves.
B.
adding horizontally the individual demand curves.
C.
adding the substitution effect and the price effect.
D.
adding vertically the individual demand curves.
A.
adding horizontally the individual marginal utility curves.
B.
adding horizontally the individual demand curves.
C.
adding the substitution effect and the price effect.
D.
adding vertically the individual demand curves.
question
−0.05. ;
C.
price inelastic because the absolute value is less than one.
C.
price inelastic because the absolute value is less than one.
answer
According to a news story, during the summer of 2015, gasoline prices were expected to decline by 32 percent, while "U.S. drivers are expected to consume slightly more gasoline, a 1.6 percent increase, during the summer."
Given this information, the price elasticity of demand for gasoline is _________(Enter your response rounded to two decimal places and include a minus sign.)
The demand is
A.
price inelastic because the value is less than zero.
B.
price elastic because the absolute value is greater than zero.
C.
price inelastic because the absolute value is less than one.
D.
price elastic because the value is less than zero.
Given this information, the price elasticity of demand for gasoline is _________(Enter your response rounded to two decimal places and include a minus sign.)
The demand is
A.
price inelastic because the value is less than zero.
B.
price elastic because the absolute value is greater than zero.
C.
price inelastic because the absolute value is less than one.
D.
price elastic because the value is less than zero.
question
fixed
variable
variable
fixed
fixed
variable
variable
fixed
fixed
answer
For Jill Johnson's pizza restaurant, explain whether each of the following is a fixed or variable cost.
The payment she makes on her fire insurance policy is a ________ cost.
The payment she makes to buy pizza dough is a _________ cost.
The wages she pays her workers is a ___________ cost.
The lease payment she makes to her landlord who owns the building where her store is located is _________ cost.
The $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a _________ cost.
The payment she makes on her fire insurance policy is a ________ cost.
The payment she makes to buy pizza dough is a _________ cost.
The wages she pays her workers is a ___________ cost.
The lease payment she makes to her landlord who owns the building where her store is located is _________ cost.
The $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a _________ cost.
question
C.
at least one of the firm's inputs is fixed, while in the long run, the firm is able to vary all its inputs, adopt new technology, and change the size of its physical plant.
at least one of the firm's inputs is fixed, while in the long run, the firm is able to vary all its inputs, adopt new technology, and change the size of its physical plant.
answer
What is the difference in the short run and the long run?
In the short run,
A.
all of the firm's inputs are variable, while in the long run, the firm is able to vary all its inputs as well as adopt new technology and change the size of its physical plant.
B.
at least one of the firm's inputs is fixed, while in the long run, at least one of the firm's inputs is variable.
C.
at least one of the firm's inputs is fixed, while in the long run, the firm is able to vary all its inputs, adopt new technology, and change the size of its physical plant.
D.
at least one of the firm's inputs is fixed, while in the long run, the firm is either able to vary all its inputs, adopt new technology, or change the size of its physical plant.
E.
all of the firm's inputs are fixed, while in the long run, the firm is able to vary all its inputs, adopt new technology, and change the size of its physical plant.
In the short run,
A.
all of the firm's inputs are variable, while in the long run, the firm is able to vary all its inputs as well as adopt new technology and change the size of its physical plant.
B.
at least one of the firm's inputs is fixed, while in the long run, at least one of the firm's inputs is variable.
C.
at least one of the firm's inputs is fixed, while in the long run, the firm is able to vary all its inputs, adopt new technology, and change the size of its physical plant.
D.
at least one of the firm's inputs is fixed, while in the long run, the firm is either able to vary all its inputs, adopt new technology, or change the size of its physical plant.
E.
all of the firm's inputs are fixed, while in the long run, the firm is able to vary all its inputs, adopt new technology, and change the size of its physical plant.
question
C.
the forgone salary and interest
the forgone salary and interest
answer
Refer to the table below. Which of the following costs are implicit costs?
A.
the lease payments
B.
the payments for paper, wages, and electricity
C.
the forgone salary and interest
D.
All of the above.
A.
the lease payments
B.
the payments for paper, wages, and electricity
C.
the forgone salary and interest
D.
All of the above.
question
B.
explicit costs
explicit costs
answer
Which of the following are sometimes called accounting costs?
A.
economic costs
B.
explicit costs
C.
implicit costs
D.
total variable costs
A.
economic costs
B.
explicit costs
C.
implicit costs
D.
total variable costs
question
A.
greater than the percentage change in price.
greater than the percentage change in price.
answer
What happens when the quantity demanded is very responsive to changes in price?
The percentage change in quantity demanded will be
A.
greater than the percentage change in price.
B.
unrelated to the percentage change in price.
C.
less than the percentage change in price.
D.
equal to the percentage change in price.
The percentage change in quantity demanded will be
A.
greater than the percentage change in price.
B.
unrelated to the percentage change in price.
C.
less than the percentage change in price.
D.
equal to the percentage change in price.
question
minimum
answer
The marginal cost curve intersects both the average variable cost and the average total cost curves at their _____________ points.
question
A.
larger than the price elasticity of demand for all breakfast cereals.
larger than the price elasticity of demand for all breakfast cereals.
answer
The price elasticity of demand for a particular brand of raisin bran is, in absolute value,
A.
larger than the price elasticity of demand for all breakfast cereals.
B.
0.
C.
smaller than the price elasticity of demand for all types of breakfast cereals.
D.
the same as the price elasticity of demand for all breakfast cereals.
A.
larger than the price elasticity of demand for all breakfast cereals.
B.
0.
C.
smaller than the price elasticity of demand for all types of breakfast cereals.
D.
the same as the price elasticity of demand for all breakfast cereals.
question
C.
increasing.
increasing.
answer
When the marginal product of labor is greater than the average product of labor, then the average product of labor must be
A.
constant.
B.
decreasing.
C.
increasing.
D.
Any of the above answers is possible.
A.
constant.
B.
decreasing.
C.
increasing.
D.
Any of the above answers is possible.
question
A.
in the short run.
in the short run.
answer
The law of diminishing returns applies
A.
in the short run.
B.
either in the short run or the long run.
C.
in the long run.
D.
None of the above.
A.
in the short run.
B.
either in the short run or the long run.
C.
in the long run.
D.
None of the above.
question
D.
average total cost
average total cost
answer
What cost measure is equal to AFC plus+AVC?
A.
marginal cost
B.
total cost
C.
total variable cost
D.
average total cost
A.
marginal cost
B.
total cost
C.
total variable cost
D.
average total cost
question
B.
average fixed cost
average fixed cost
answer
All of the following cost measures reach their minimum points when they are equal to the value of marginal cost, except one. Which cost measure is the exception?
A.
average variable cost
B.
average fixed cost
C.
average total cost
D.
There is no exception; all three measures above reach their minimum values when they are equal to the value of marginal cost.
A.
average variable cost
B.
average fixed cost
C.
average total cost
D.
There is no exception; all three measures above reach their minimum values when they are equal to the value of marginal cost.
question
D.
smaller; average fixed cost
smaller; average fixed cost
answer
As output increases, the vertical distance between average total cost and average variable cost curves gets _______ and equals _______.
A.
larger; marginal cost
B.
larger; average fixed cost
C.
smaller; total fixed cost
D.
smaller; average fixed cost
A.
larger; marginal cost
B.
larger; average fixed cost
C.
smaller; total fixed cost
D.
smaller; average fixed cost
question
D.
elastic
elastic
answer
If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in the quantity demanded of 25 percent, demand for Red Bull is _______ in this range.
A.
inelastic
B.
vertical
C.
unit elastic
D.
elastic
A.
inelastic
B.
vertical
C.
unit elastic
D.
elastic
question
A.
the enjoyment or satisfaction people receive from consuming goods and services.
No, its not measurable
the enjoyment or satisfaction people receive from consuming goods and services.
No, its not measurable
answer
What is the economic definition of utility?
Utility is
A.
the enjoyment or satisfaction people receive from consuming goods and services.
B.
the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
C.
the sum of consumer and producer surplus.
D.
the change in enjoyment or satisfaction a person receives from consuming one additional unit of a good or service.
E.
the decrease in additional satisfaction consumers receive as they consume more of a good or service during a given period of time.
Utility is
A.
the enjoyment or satisfaction people receive from consuming goods and services.
B.
the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
C.
the sum of consumer and producer surplus.
D.
the change in enjoyment or satisfaction a person receives from consuming one additional unit of a good or service.
E.
the decrease in additional satisfaction consumers receive as they consume more of a good or service during a given period of time.
question
D.
less; smaller
less; smaller
answer
In general, the demand for a good will be _________ elastic the ___________ the share of the good in the average consumer's budget.
A.
unit; larger
B.
less; larger
C.
more; smaller
D.
less; smaller
A.
unit; larger
B.
less; larger
C.
more; smaller
D.
less; smaller
question
ATC=TC/Q
MC =ΔTC/ΔQ.
MC =ΔTC/ΔQ.
answer
What is the difference between the average cost of production (ATC) and marginal cost of production (MC)?
question
D.
Succeeding in school.
Succeeding in school.
answer
In an article in the Quarterly Journal of Economics, Ted O'Donoghue and Matthew Rabin make the following observation:
"People have self-control problems caused by a tendency to pursue immediate gratification in a way that their 'long-run selves' do not appreciate."
Which of the following is an example of pursuing a goal which is in a person's long-term interest?
A.
Spending more money than you earn.
B.
Eating donuts instead of sticking to a healthy diet.
C.
Going to the movies instead of studying.
D.
Succeeding in school.
"People have self-control problems caused by a tendency to pursue immediate gratification in a way that their 'long-run selves' do not appreciate."
Which of the following is an example of pursuing a goal which is in a person's long-term interest?
A.
Spending more money than you earn.
B.
Eating donuts instead of sticking to a healthy diet.
C.
Going to the movies instead of studying.
D.
Succeeding in school.
question
D.
production function.
production function.
answer
The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the
A.
consumption function.
B.
budget constraint.
C.
utility curve.
D.
production function.
A.
consumption function.
B.
budget constraint.
C.
utility curve.
D.
production function.
question
B.
It is a sunk cost and should not be taken into account when deciding to pay off the mortgage.
It is a sunk cost and should not be taken into account when deciding to pay off the mortgage.
answer
[Related to the Making the Connection] The following excerpt is from a letter sent to a financial advice columnist:
"My wife and I are trying to decide how to invest a $250,000 windfall. She wants to pay off our $114,000 mortgage, but I'm not eager to do that because we refinanced only nine months ago, paying $3,000 in fees and costs."
How should the $3,000 in fees and costs be considered?
A.
It is a sunk cost and should be taken into account when deciding to pay off the mortgage.
B.
It is a sunk cost and should not be taken into account when deciding to pay off the mortgage.
C.
It should be taken into consideration in the decision as to whether or not to pay off the mortgage.
D.
It is an explicit cost of paying off the mortgage.
"My wife and I are trying to decide how to invest a $250,000 windfall. She wants to pay off our $114,000 mortgage, but I'm not eager to do that because we refinanced only nine months ago, paying $3,000 in fees and costs."
How should the $3,000 in fees and costs be considered?
A.
It is a sunk cost and should be taken into account when deciding to pay off the mortgage.
B.
It is a sunk cost and should not be taken into account when deciding to pay off the mortgage.
C.
It should be taken into consideration in the decision as to whether or not to pay off the mortgage.
D.
It is an explicit cost of paying off the mortgage.
question
A.
demand is perfectly inelastic.
demand is perfectly inelastic.
answer
"Our costs are currently $150,000 more than our revenues each month. I propose to eliminate this problem by raising the price of the magazine to $3.00 per issue. This will result in our revenue being exactly equal to our cost."
Current price
$2.00 per issue
Current sales
150,000 copies per month
Current total costs
$450,000 per month
In order for the publisher's analysis to be correct,
A.
demand is perfectly inelastic.
B.
demand is elastic.
C.
demand is perfectly elastic.
D.
demand is inelastic.
Current price
$2.00 per issue
Current sales
150,000 copies per month
Current total costs
$450,000 per month
In order for the publisher's analysis to be correct,
A.
demand is perfectly inelastic.
B.
demand is elastic.
C.
demand is perfectly elastic.
D.
demand is inelastic.
question
C.
Either (a) or (b).
Either (a) or (b).
answer
When a positive technological change occurs,
A.
more output can be produced from the same inputs.
B.
the same output can be produced with fewer inputs.
C.
Either (a) or (b).
D.
None of the above.
A.
more output can be produced from the same inputs.
B.
the same output can be produced with fewer inputs.
C.
Either (a) or (b).
D.
None of the above.
question
C.
it changes the relative price of the product causing a substitution effect and at the same time it changes the purchasing power of the buyer causing an income effect as well.
it changes the relative price of the product causing a substitution effect and at the same time it changes the purchasing power of the buyer causing an income effect as well.
answer
When the price of a product changes,
A.
it only causes an income effect by changing the purchasing power of the consumer.
B.
it only causes a substitution effect by changing the relative price of the product.
C.
it changes the relative price of the product causing a substitution effect and at the same time it changes the purchasing power of the buyer causing an income effect as well.
D.
it changes the relative price of the product causing a network effect and at the same time it changes the purchasing power of the buyer causing an income effect as well.
A.
it only causes an income effect by changing the purchasing power of the consumer.
B.
it only causes a substitution effect by changing the relative price of the product.
C.
it changes the relative price of the product causing a substitution effect and at the same time it changes the purchasing power of the buyer causing an income effect as well.
D.
it changes the relative price of the product causing a network effect and at the same time it changes the purchasing power of the buyer causing an income effect as well.
question
A.
consumers find it unfair for firms to increase prices after an increase in demand.
consumers find it unfair for firms to increase prices after an increase in demand.
answer
What explanations have economists offered for why firms don't raise prices when doing so would seem to increase profits?
Firms might not raise prices when doing so might increase profits because
A.
consumers find it unfair for firms to increase prices after an increase in demand.
B.
consumers find it unfair for firms to increase prices after an increase in costs.
C.
the amount consumers wish to buy is unrelated to how much of the product other people are consuming.
D.
firms are not concerned about profit in the long run.
E.
both a and b.
Firms might not raise prices when doing so might increase profits because
A.
consumers find it unfair for firms to increase prices after an increase in demand.
B.
consumers find it unfair for firms to increase prices after an increase in costs.
C.
the amount consumers wish to buy is unrelated to how much of the product other people are consuming.
D.
firms are not concerned about profit in the long run.
E.
both a and b.
question
A.
It is the limited amount of income available to consumers to spend on goods and services.
It is the limited amount of income available to consumers to spend on goods and services.
answer
What is a budget constraint?
A.
It is the limited amount of income available to consumers to spend on goods and services.
B.
It is the amount of money necessary to purchase a given combination of goods.
C.
It is the amount of income that yields equal marginal utility per dollar spent.
D.
It is the amount of utility that a consumer receives from spending a limited amount of income on goods and services.
A.
It is the limited amount of income available to consumers to spend on goods and services.
B.
It is the amount of money necessary to purchase a given combination of goods.
C.
It is the amount of income that yields equal marginal utility per dollar spent.
D.
It is the amount of utility that a consumer receives from spending a limited amount of income on goods and services.
question
D.
where your marginal utility per dollar spent on pizza equals your marginal utility per dollar spent on coke.
where your marginal utility per dollar spent on pizza equals your marginal utility per dollar spent on coke.
answer
The optimal combination of pizza and coke you should consume is the one
A.
where your marginal utility of pizza equals your marginal utility of coke.
B.
where your total utility of pizza equals your total utility of coke.
C.
where your marginal utility of pizza equals your total utility of pizza, and your marginal utility of coke equals your total utility of coke.
D.
where your marginal utility per dollar spent on pizza equals your marginal utility per dollar spent on coke.
A.
where your marginal utility of pizza equals your marginal utility of coke.
B.
where your total utility of pizza equals your total utility of coke.
C.
where your marginal utility of pizza equals your total utility of pizza, and your marginal utility of coke equals your total utility of coke.
D.
where your marginal utility per dollar spent on pizza equals your marginal utility per dollar spent on coke.
question
D.
the endowment effect in which Marvin is not considering the nonmonetary opportunity cost of the ticket.
the endowment effect in which Marvin is not considering the nonmonetary opportunity cost of the ticket.
answer
Marvin visits his aunt and uncle who live in Milwaukee. The Milwaukee Bucks basketball team is scheduled to play a home game against the Golden State Warriors during Marvin's visit. An online broker has a ticket for sale in Section 212 of the arena where the game will be played but the price, $75, is more than Marvin is willing to pay. From another online ticket broker he buys a ticket for $50 for a seat in Section 212 of the arena. On the day of the game, a friend of Marvin's uncle offers to pay Marvin $75 for his ticket. He declines the offer.
Marvin's refusal to sell his ticket can be explained by
A.
his unrealistic view of his future behavior.
B.
his failure to ignore the sunk costs of the ticket.
C.
his inclusion of the sunk costs of the ticket in his decision.
D.
the endowment effect in which Marvin is not considering the nonmonetary opportunity cost of the ticket.
Marvin's refusal to sell his ticket can be explained by
A.
his unrealistic view of his future behavior.
B.
his failure to ignore the sunk costs of the ticket.
C.
his inclusion of the sunk costs of the ticket in his decision.
D.
the endowment effect in which Marvin is not considering the nonmonetary opportunity cost of the ticket.
question
A.
Fax machines
Fax machines
answer
Which of the following products is most likely to have significant network externalities?
A.
Fax machines
B.
LCD television sets
C.
Dog food
D.
3D television sets
A.
Fax machines
B.
LCD television sets
C.
Dog food
D.
3D television sets
question
C.
Firms will not raise prices in response to an increase in demand.
Firms will not raise prices in response to an increase in demand.
answer
How does the fact that consumers apparently value fairness affect the decisions that businesses make?
A.
Firms are not affected by consumers' value of fairness.
B.
Firms will not raise prices in response to an increase in costs.
C.
Firms will not raise prices in response to an increase in demand.
D.
Firms will set prices equal to the long-run average cost of production.
E.
Firms will raise prices in response to an increase in demand.
A.
Firms are not affected by consumers' value of fairness.
B.
Firms will not raise prices in response to an increase in costs.
C.
Firms will not raise prices in response to an increase in demand.
D.
Firms will set prices equal to the long-run average cost of production.
E.
Firms will raise prices in response to an increase in demand.
question
increased;
D.
inelastic because Coke's revenue increased following an increase in price.
D.
inelastic because Coke's revenue increased following an increase in price.
answer
According to a company news release, during the third quarter of 2014, the Coca-Cola Company sold 1 percent less soda in North America while earning more revenue.
a. During this period, Coke must have ______ its soda prices.
b. Based on this information, the demand for Coke is price
A.
elastic because Coke's revenue increased following an increase in price.
B.
elastic because Coke's revenue increased following a decrease in price.
C.
inelastic because Coke's revenue decreased following an increase in price.
D.
inelastic because Coke's revenue increased following an increase in price.
a. During this period, Coke must have ______ its soda prices.
b. Based on this information, the demand for Coke is price
A.
elastic because Coke's revenue increased following an increase in price.
B.
elastic because Coke's revenue increased following a decrease in price.
C.
inelastic because Coke's revenue decreased following an increase in price.
D.
inelastic because Coke's revenue increased following an increase in price.
question
B.
the long-run average cost curve
the long-run average cost curve
answer
Which of the following terms refers to the lowest cost at which a firm is able to produce a given level of output in the long run, when no inputs are fixed?
A.
economies of scale
B.
the long-run average cost curve
C.
the long-run marginal cost curve
D.
the variable inputs curve
A.
economies of scale
B.
the long-run average cost curve
C.
the long-run marginal cost curve
D.
the variable inputs curve
question
B.
decreases
decreases
answer
Economies of scale happen when the firm's long run average total cost ________ as output increases.
A.
increases
B.
decreases
C.
is zero
D.
remains constant
A.
increases
B.
decreases
C.
is zero
D.
remains constant
question
A.
You can increase your consumption of Red Bull.
You can increase your consumption of Red Bull.
answer
The marginal utility per dollar you are spending on iTunes music downloads is less than the marginal utility per dollar you are spending on Red Bull. According to the rule of equal marginal utility per dollar spent, what can you do to increase your total utility from consumption of music downloads and Red Bull?
A.
You can increase your consumption of Red Bull.
B.
You can increase your consumption of both goods.
C.
You can decrease your consumption of both goods.
D.
You can increase your consumption of music downloads.
A.
You can increase your consumption of Red Bull.
B.
You can increase your consumption of both goods.
C.
You can decrease your consumption of both goods.
D.
You can increase your consumption of music downloads.
question
D.
variable costs
variable costs
answer
Which costs are affected by the level of output produced?
A.
all costs
B.
sunk costs
C.
fixed costs
D.
variable costs
A.
all costs
B.
sunk costs
C.
fixed costs
D.
variable costs
question
C.
decreasing.
decreasing.
answer
When marginal cost is less than average total cost, average total cost must be
A.
constant.
B.
increasing.
C.
decreasing.
D.
negative.
A.
constant.
B.
increasing.
C.
decreasing.
D.
negative.
question
B.
marginal; average
marginal; average
answer
The GPA you earn in a particular semester is your ________ GPA, and your cumulative GPA for all completed semesters is your ________ GPA.
A.
average; marginal
B.
marginal; average
C.
total; marginal
D.
average; total
A.
average; marginal
B.
marginal; average
C.
total; marginal
D.
average; total
question
B.
a normal good because as incomes increase people drive more.
a normal good because as incomes increase people drive more.
answer
In early 2015, gasoline prices in many parts of the United States had fallen to below $2.00 per gallon, which a news story called "one of the swiftest declines on record."
A.
an inferior good because as incomes increase people drive less.
B.
a normal good because as incomes increase people drive more.
C.
a normal good because as the price increases people drive less.
D.
an inferior good because as the price increases people drive more.
A.
an inferior good because as incomes increase people drive less.
B.
a normal good because as incomes increase people drive more.
C.
a normal good because as the price increases people drive less.
D.
an inferior good because as the price increases people drive more.
question
increase more
answer
Why is your answer important for predicting how much the quantity of gasoline demanded will increase as a result of the price decline?
When the price of a good declines, the income effect tells us that the quantity demanded will ___________ more if the good is a normal good than if it is an inferior good.
When the price of a good declines, the income effect tells us that the quantity demanded will ___________ more if the good is a normal good than if it is an inferior good.
question
C.
you are making a rational choice since the opportunity cost of the book is $5,000.
you are making a rational choice since the opportunity cost of the book is $5,000.
answer
Suppose that you are a big fan of the Harry Potter books. You would love to own a copy of the very first printing of the first book, but unfortunately you can't find it for sale for less than $5,000. You are willing to pay at most $200 for a copy, but can't find one at that price until one day in a used bookstore you see a copy selling for $10, which you immediately buy.
If you keep the copy rather than sell it, then all of the following are correct except
A.
you are behaving in a way that can be explained by the endowment effect.
B.
you value the book you already own more than a book you do not yet own.
C.
you are making a rational choice since the opportunity cost of the book is $5,000.
D.
you have made choices that do not appear to be economically rational.
If you keep the copy rather than sell it, then all of the following are correct except
A.
you are behaving in a way that can be explained by the endowment effect.
B.
you value the book you already own more than a book you do not yet own.
C.
you are making a rational choice since the opportunity cost of the book is $5,000.
D.
you have made choices that do not appear to be economically rational.
question
C.
marginal utility decreases.
marginal utility decreases.
answer
According to the law of diminishing marginal utility, as the consumption of a particular good increases,
A.
total utility decreases.
B.
marginal utility increases.
C.
marginal utility decreases.
D.
total utility increases by larger and larger amounts.
A.
total utility decreases.
B.
marginal utility increases.
C.
marginal utility decreases.
D.
total utility increases by larger and larger amounts.
question
B. They were willing to trade off some profits to keep their regular customers happy.
answer
Las Vegas is one of the most popular tourist destinations in the United States. In November 2008, the Rio Hotel and Casino in Las Vegas dropped the price of its breakfast buffet to $5.99 for local residents, while keeping the regular price of $14.99 for nonlocals.
Why would the restaurant do this?
A.
They had a more difficult time raising prices when it was justified by cost increases.
B.
They were willing to trade off some profits to keep their regular customers happy.
C.
Tourists will return often to the restaurants.
D.
They wanted to appear unfair to tourists.
Why would the restaurant do this?
A.
They had a more difficult time raising prices when it was justified by cost increases.
B.
They were willing to trade off some profits to keep their regular customers happy.
C.
Tourists will return often to the restaurants.
D.
They wanted to appear unfair to tourists.
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