Keith is indifferent between canned soup and fresh soup. In the figure above, Keith’s indifference curves are represented by I1, I2, I3, and I4 curves. Canned soup sells for $1 per serving and fresh soup sells for $2 per serving. What is Keith’s income? A) $8 B) $4 C) $2 D) $5 ANSWER B […]
Date: September 9th, 2020
Bounded rationality suggests that A) individuals might make “incorrect” decisions because they are unable to consider all possible options. B) individuals would rather have less choice to more choice. C) rational decisions can only be made when choices are restricted. D) individuals are happier when their choices are restricted or “bounded.” ANSWER A
Date: September 9th, 2020
Behavioral economics extends traditional economic models by A) including insights from psychology and human cognition models. B) modeling behavior rather than prices. C) admitting that individuals are irrational. D) admitting that incentives are very important. ANSWER A
Date: September 9th, 2020
Lisa consumes only pizzas (P) and burritos (B). Her utility function is U = P0.5 B0.5. The price of per pizza is $10 and the price per burrito is $5. In equilibrium, Lisa consumes 4 pizzas. Using Lisa’s utility function, calculate how many burritos she consumes. What will be an ideal response? ANSWER The […]
Date: September 9th, 2020
In behavioral economics, salience is best exemplified by A) consumers responding differently when posted prices increase rather than when prices increase because of sales tax increases. B) consumers responding the same regardless of how prices change. C) the end of a controlled experiment. D) consumers responding differently when income increases permanently rather than temporarily. […]
Date: September 9th, 2020
Consumers do not prefer gifts-in-kind to cash gifts. Indicate whether the statement is true or false ANSWER True . It is possible the consumer would buy the same gift with cash and therefore be just as well off. If the consumer bought something other than the gift, that means that this something else is […]
Date: September 9th, 2020
Behavioral economists have discovered that A) experimental design is important. B) experimental design doesn’t matter for most questions. C) experimental design only matters when people have bounded rationality. D) experimental design doesn’t matter when people have bounded rationality. ANSWER A
Date: September 9th, 2020
Behavioral economists use which technique to test economic theory? A) controlled experiments B) price theory C) environmental economics D) lie detector tests ANSWER A
Date: September 9th, 2020
Researchers have found that tax increases may have a small effect in the quantity purchased because A) individuals might forget about the tax (salience). B) individuals are rational. C) individuals are credit constrained. D) individuals do not care about prices. ANSWER A
Date: September 9th, 2020
Lisa consumes only pizzas and burritos. In equilibrium, her marginal utility of pizza is 20 and her marginal utility of a burrito is 10. The price of a pizza is $4. What is the price of a burrito? What will be an ideal response? ANSWER In equilibrium, the ratio of the marginal utility of […]
Date: September 9th, 2020
