Question 1

Eliza consumes 12 cappuccinos and 8 apple turnovers per week.The price of cappuccino is $4 each and apple turnovers are $1 each.
a.What is the amount of income allocated to cappuccino and apple turnover consumption?
b.What is the price ratio (the price of cappuccino relative to the price of apple turnovers)?
c.Explain the meaning of the price ratio you computed.
d.If Eliza maximize utility,what is the ratio of the marginal utility of cappuccino to the marginal utility of apple turnovers?
e.If the price of apple turnovers falls,will Eliza consume more apple turnovers,fewer apple turnovers or the same amount of apple turnovers? Explain your answer using the rule of equal marginal utility per dollar.

Accepted Answer

The answer of Eliza consumes 12 cappuccinos and 8 apple...

Question 2

Giffen goods
A)are theoretical and have never been discovered in the real world.
B)have not existed since prior to the Industrial Revolution.
C)were proven to exist in the 1890s by Sir Robert Giffen.
D)were not shown to actually exist until 2006.

Accepted Answer

The answer of Giffen goods
A)are theoretical and have never been...

Question 3

Figure 7-1 -Refer to Figure 7-1.Which of the following statements is true? A)Quantities Q₀ and Q₁ are the utility-maximizing quantities of hoagies at two different prices of hoagies. B)Quantities Q₀ and Q₁ may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. C)Quantity Q₀ could be a utility-maximizing choice if the price is $5.75,but quantity Q₁ may not be because we have no information on the marginal utility per dollar when price changes. D)Quantities Q₀ and Q₁ are derived independently of the utility-maximizing model.

Accepted Answer

The answer of Figure 7-1 
-Refer to Figure 7-1.Which of...

Question 4

Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea.The price of a pineapple is $4 and the price of a bottle of green tea is $2.The table below shows Arnie's utility values.Use the table to answer the questions that follow the table.
  a.Complete the table by filling in the blank spaces.
b.Suppose Arnold purchases 4 pineapples and 2 bottles of green tea.Is he consuming the optimal consumption bundle? If so,explain why.If not,what combination should he buy and why?

Accepted Answer

The answer of Arnie Ziffel has $20 per week to...

Question 5

Each price-quantity combination on a consumer's demand curve shows the utility-maximizing quantity at the given price.

Accepted Answer

This is true. Each point on a demand curve shows the quantity of a good or service that a consumer is willing to purchase at a given price, based on their utility-maximizing preferences. As the price decreases, the quantity demanded typically increases, reflecting the inverse relationship between price and quantity demanded.

Question 6

The demand curve for a Giffen good is
A)non-linear but downward-sloping.
B)vertical.
C)upward-sloping.
D)non-existent.

Accepted Answer

A Giffen good is a type of inferior good for which an increase in its price actually increases its quantity demanded. As a result, the demand curve for a Giffen good must be upward-sloping.

Question 7

What is the common feature displayed by the following items? a.eating in a newly opened "fusion" cuisine restaurant
B.attending a Red Sox game in Fenway Park
C.wearing Lucky Brand designer jeans
A)They are all highly inelastic goods.
B)The consumption of these goods takes place privately.
C)The consumption of these goods takes place publicly.
D)They tend to be consumed by better educated people.

Accepted Answer

The common feature displayed by the given items is that the consumption of these goods takes place publicly. Eating in a newly opened "fusion" cuisine restaurant, attending a Red Sox game in Fenway Park, and wearing Lucky Brand designer jeans are all activities that are visible to others and are often done with the intention of displaying one's taste or status to others.

Question 8

Figure 7-1 -Refer to Figure 7-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q₁ to Q₀.This change in quantity demanded is due to A)the price and output effects. B)the income and substitution effects. C)the fact that marginal willingness to pay falls. D)the law of diminishing marginal utility.

Accepted Answer

The change in quantity demanded due to a price increase is explained by the income and substitution effects. The substitution effect occurs as consumers switch to cheaper alternatives, and the income effect occurs as the price increase effectively reduces consumers' purchasing power.

Question 9

Along a downward-sloping linear demand curve,
A)the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase.
B)the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities remain constant.
C)the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases.
D)the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remain constant.

Accepted Answer

Along a downward-sloping linear demand curve, the marginal utility from the consumption of each unit of the good falls as more units are consumed. This is because as the quantity consumed increases, the consumer's willingness to pay for each additional unit decreases. However, the total utility from consuming larger quantities increases due to the law of diminishing marginal utility - the more units that are consumed, the less additional utility is gained from each additional unit, but the total utility still increases as long as the marginal utility is positive.

Question 10

After getting an A on your economics exam,you decide to go to your favorite Mexican restaurant to celebrate.You are having trouble deciding whether to order the chipotle chicken chimichanga or the cilantro seafood enchiladas.Use the rule of equal marginal utility per dollar to determine which one to purchase: (a)the chimichanga for $8 which gives you 120 units of utility,or (b)the enchiladas for $15 which gives you 195 units of utility?

Accepted Answer

The answer of After getting an A on your economics...

Question 11

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good,with an income effect larger than its substitution effect,a good must be ________ and make up a ________ portion of a consumer's budget.
A)a normal good;very small
B)an inferior good;very small
C)a normal good;very large
D)an inferior good;very large

Accepted Answer

According to the definition of a Giffen good, it must be an inferior good, meaning that as income increases, the demand for the good decreases. Additionally, the income effect must be larger than the substitution effect. This can occur when the good makes up a large portion of a consumer's budget, such that as its price increases, the consumer is unable to afford other goods and must continue to buy the good despite its higher price. Therefore, choice D (an inferior good;very large) is the best answer.

Question 12

The demand curve for an inferior good can never be downward-sloping.

Accepted Answer

The demand curve for an inferior good can be downward-sloping as the quantity demanded decreases as income increases.

Question 13

The income effect of a price increase for a Giffen good outweighs the substitution effect.

Accepted Answer

In the case of a Giffen good, the income effect is so strong that it outweighs the substitution effect. This means that as the price of the good increases, the consumer's real income decreases, leading them to purchase even more of the inferior good. This is in contrast to a normal good where the substitution effect dominates, leading the consumer to switch to a cheaper alternative as the price of the good increases.

Question 14

What is a Giffen good?

Accepted Answer

The answer of What is a Giffen good?...

Question 15

What is marginal utility and what is the law of diminishing marginal utility?

Accepted Answer

The answer of What is marginal utility and what is...

Question 16

The demand curve for a luxury good is upward-sloping.

Accepted Answer

Luxury goods generally have a downward-sloping demand curve as they are considered non-essential and higher-priced items. As the price of luxury goods increases, the demand for them typically decreases.

Question 17

In order to derive an individual's demand curve for salmon,we would observe what happens to the utility-maximizing bundle when we change
A)income and hold everything else constant.
B)tastes and preferences and hold everything else constant.
C)the price of the product and hold everything else constant.
D)the price of a close substitute and hold everything else constant.

Accepted Answer

In order to derive an individual's demand curve for salmon, we need to observe the effect of changing the price of the product while holding everything else constant. This is because the demand for salmon will vary depending on its price, assuming that other factors like income and tastes remain constant. By observing how the utility-maximizing bundle changes as the price of salmon changes, we can construct an individual's demand curve for the product.

Question 18

What must be true in terms of the income effect,the substitution effect,and the type of good for the good's demand curve to be upward sloping?

Accepted Answer

The answer of What must be true in terms of...

Question 19

Consider the following factors: a.culture
B.religion
C.customs
D.prices
E.income
Which of the factors above are likely to influence the choices consumers make?
A)a,d,and e only
B)all the factors except b
C)all the factors except c
D)d and e only
E)all the factors listed

Accepted Answer

All the factors listed are likely to influence the choices consumers make. Culture, religion, and customs can impact what products are acceptable or taboo in a particular society. Prices and income can affect affordability and willingness to purchase certain products. Overall, all of these factors can influence consumer behavior and purchasing decisions.

Question 20

A Giffen good could be either a normal good or an inferior good.

Accepted Answer

The answer of A Giffen good could be either a...

Quiz 7: Consumer Choice and Elasticity

Giffen goods

Figure 7-1 -Refer to Figure 7-1.Which of the following statements is true?

Each price-quantity combination on a consumer's demand curve shows the utility-maximizing quantity at the given price.

The demand curve for a Giffen good is

What is the common feature displayed by the following items? a.eating in a newly opened "fusion" cuisine restaurant B.attending a Red Sox game in Fenway Park C.wearing Lucky Brand designer jeans

Figure 7-1 -Refer to Figure 7-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q₁ to Q₀.This change in quantity demanded is due to

Along a downward-sloping linear demand curve,

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good,with an income effect larger than its substitution effect,a good must be and make up a portion of a consumer's budget.

The demand curve for an inferior good can never be downward-sloping.

The income effect of a price increase for a Giffen good outweighs the substitution effect.

What is a Giffen good?

What is marginal utility and what is the law of diminishing marginal utility?

The demand curve for a luxury good is upward-sloping.

In order to derive an individual's demand curve for salmon,we would observe what happens to the utility-maximizing bundle when we change

What must be true in terms of the income effect,the substitution effect,and the type of good for the good's demand curve to be upward sloping?

Consider the following factors: a.culture B.religion C.customs D.prices E.income Which of the factors above are likely to influence the choices consumers make?

A Giffen good could be either a normal good or an inferior good.

Quiz 7: Consumer Choice and Elasticity

Giffen goods

Figure 7-1 -Refer to Figure 7-1.Which of the following statements is true?

Each price-quantity combination on a consumer's demand curve shows the utility-maximizing quantity at the given price.

The demand curve for a Giffen good is

What is the common feature displayed by the following items? a.eating in a newly opened "fusion" cuisine restaurant B.attending a Red Sox game in Fenway Park C.wearing Lucky Brand designer jeans

Figure 7-1 -Refer to Figure 7-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q1 to Q0.This change in quantity demanded is due to

Along a downward-sloping linear demand curve,

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good,with an income effect larger than its substitution effect,a good must be ________ and make up a ________ portion of a consumer's budget.

The demand curve for an inferior good can never be downward-sloping.

The income effect of a price increase for a Giffen good outweighs the substitution effect.

What is a Giffen good?

What is marginal utility and what is the law of diminishing marginal utility?

The demand curve for a luxury good is upward-sloping.

In order to derive an individual's demand curve for salmon,we would observe what happens to the utility-maximizing bundle when we change

What must be true in terms of the income effect,the substitution effect,and the type of good for the good's demand curve to be upward sloping?

Consider the following factors: a.culture B.religion C.customs D.prices E.income Which of the factors above are likely to influence the choices consumers make?

A Giffen good could be either a normal good or an inferior good.

Figure 7-1 -Refer to Figure 7-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q₁ to Q₀.This change in quantity demanded is due to

Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good,with an income effect larger than its substitution effect,a good must be and make up a portion of a consumer's budget.