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
Behavioral economists have discovered that A) transitivity of preferences always holds, even in animals. B) the law of demand does not hold in controlled experiments. C) transitivity of preferences does not always hold, especially for young people. D) reflexivity of preferences is not true. ANSWER C
Date: September 9th, 2020
An increase in the price of a good causes A) a change in the slope of the budget line. B) an increase in the consumption of that good. C) a rightward shift of the demand curve for that good. D) a parallel rightward shift of the budget line. ANSWER A
Date: September 9th, 2020
In Spain, people are considered organ donors unless the explicitly indicate they do not want to be. In the United States, people are only considered organ donors if they explicitly indicate they wish to be. Behavioral economics would suggest that A) everything else equal, the opt-in system of Spain would generate more organ donors as […]
Date: September 9th, 2020
In behavioral economics, the endowment effect refers to A) most people believe that most wealthy people inherit their wealth. B) many people would be indifferent between being endowed with money or knowledge. C) many people place a higher value on what they own than when they consider purchasing. D) most people respond to tax incentives […]
Date: September 9th, 2020
In behavioral economics, the term salience refers to A) relevance to the problem being investigated. B) people only consider information when it is conveyed in a subtle manner. C) how an experiment is designed. D) people consider information when it is presented in an “eye grabbing” manner. ANSWER D
Date: September 9th, 2020
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
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
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
