ECO 365T Wk 4 - Practice Knowledge Check

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ECO 365T Wk 4 - Practice Knowledge Check

Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are \$4 and \$2, respectively, and that the consumer's income is \$18.

Units of X      Marginal Utility, XUnits of Y      Marginal Utility, Y

1     20    1     16

2     16    2     14

3     12    3     12

4     8     4     10

5     6     5     8

6     4     6     6

Which of the following represents the demand schedule for X?

Multiple Choice

•

P          Qd

\$4         2

2          5

•

P          Qd

\$4         2

2          4

•

P          Qd

\$4         3

2          6

•

P          Qd

\$4         3

2          5

The individual demand curve that is implied by the budget constraints and indifference curves above will be

Multiple Choice

•      perfectly elastic.
•      relatively elastic.
•      perfectly inelastic.
•      relatively inelastic.

A change in the slope of a budget line is solely the result of a change in

Multiple Choice

•      consumer preferences.
•      the price of one good relative to the other.
•      money income.
•      the slope of the indifference curve that is tangent to the budget line.

If the marginal utility from consuming the fifth unit of a product is 6 and the total utility from all five units is 162, then the total utility from consuming four units must be

Multiple Choice

•      168.
•      27.
•      156.
•      972.

The goal of a rational consumer is to maximize

Multiple Choice

•      the quantities of all goods consumed.
•      the MU/P of all goods consumed.
•      marginal utility of all goods consumed.
•      total utility from all goods consumed.

In the face of rising costs, some firms reduce the quality of the goods they produce rather than maintain quality and increase prices. How would behavioral economics explain this strategy?

Multiple Choice

•      People have an aversion to losses, and consumers are more likely to feel the loss of a price increase than a quality reduction.
•      Consumers are more tolerant of diminished quality because diminishing marginal utility causes people to get rid of goods sooner than in the past.
•      Firms are myopic in their decision making, with little regard for future profitability.
•      The availability heuristic will cause people to buy whatever is offered, regardless of the quality.

(Consider This) When the federal government started requiring restaurants to print calorie counts next to menu items, some people increased their consumption of higher-calorie items. Which of the following best explains this phenomenon?

Multiple Choice

•      Consumers at restaurants are systematically irrational.
•      Consumers are more interested in maximizing calories per dollar than health per dollar.
•      Restaurants lowered the prices of healthier items, signaling to consumers that they are less appealing.
•      Restaurants cut portion sizes on all items to reduce calorie counts.

Which of the following statements best reflects how a behavioral economist views individual decision making?

Multiple Choice

•      Alex makes wrong decisions sometimes, but usually it is only when he has been given bad information.
•      Kara carefully calculates and weighs the expected benefits and costs of every option before making a decision.
•      Alyssa may appear to care about others, but even her seemingly altruistic behaviors are really about furthering her own interests.
•      Balin tries to make good, well-thought-out decisions, but his desire for utility in the present means that he often gives in to costly temptations.

Given the indifference curve and budget line above, this individual

Multiple Choice

•      prefers B to A, but B costs more.
•      prefers B to A, and they cost the same.
•      is indifferent between A and B, but A costs less.
•      is indifferent between A and B, and they cost the same
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