Quiz 4: Consumer Choice

An indifference curve represents bundles of goods that a consumer A)views as equally desirable. B)ranks from most preferred to least preferred. C)refers to any other bundle of goods. D)All of the above.

The assumption of completeness means that A)the consumer can rank all possible consumption bundles. B)more of a good is always better. C)the consumers can rank all affordable consumption bundles. D)all preferences conditions are met.

If a consumer prefers Apples to Bananas and prefers Bananas to Citrus Fruit, in order to satisfy assumptions about preferences she has to prefer A)Bananas to Apples. B)Citrus Fruit to Bananas. C)Apples to Citrus Fruit. D)Citrus Fruit to Apples.

The principle that "More is better" results in indifference curves A)sloping down. B)not intersecting. C)reflecting greater preferences the further they are from the origin. D)All of the above.

If two indifference curves were to intersect at a point, this would violate the assumption of A)transitivity. B)completeness. C)Both A and B above. D)None of the above.

Indifference curves that are thick violate A)the assumption of transitivity. B)the assumption that more is better. C)the assumption of completeness. D)none of the assumptions.

A consumer's willingness to trade one good for another can be expressed by the consumer's A)indifference curve. B)marginal rate of substitution. C)Both A and B above. D)None of the above.

Convexity of indifference curves implies that consumers are willing to A)give up more "y" to get an extra "x" the more "x" they have. B)give up more "y" to get an extra "x" the less "x" they have. C)settle for less of both "x" and "y". D)acquire more "x" only if they do not have to give up any "y".

Measuring "y" on the vertical axis and "x" on the horizontal axis, convexity of indifference curves implies that the MRS of "y" for "x" A)is decreasing as "x" increases. B)is increasing as "x" increases. C)is constant as "x" increases. D)cannot be calculated for large levels of "x".

Diminishing marginal rate of substitution can be seen when indifference curves A)cross. B)are convex. C)are downward sloping. D)become flatter as we move down and to the right.

If two goods are perfect substitutes, then the indifference curves for those two goods would be A)upward sloping and concave to the origin. B)downward sloping and convex to the origin. C)downward sloping and straight. D)L-shaped.

The indifference curves for left shoes and right shoes would most likely be A)upward sloping and concave to the origin. B)downward sloping and convex to the origin. C)downward sloping and straight lines. D)L-shaped.

The statement "There is no accounting for taste" implies A)individuals all have the same preferences. B)individuals all have different cardinal preferences but the same ordinal preferences. C)individuals all have different ordinal preferences but the same cardinal preferences. D)individuals all have different ordinal and cardinal preferences.

Economists use a preference map to illustrate that A)more is better than less. B)preferences are transitive. C)preferences are complete. D)All of the above.

Indifference curves that are upward-sloping violate A)the assumption of transitivity. B)the assumption of completeness. C)the assumption that more is better. D)none of the assumptions.

Indifference curves cannot intersect.

Indifference curves cannot ever be concave for two goods.

Indifference curves for perfect substitutes must be parallel lines with a slope of negative one.

Indifference curves on the same indifference map can have different shapes.

Lisa views pizzas and burritos as goods. If she prefers a bundle of 4 burritos and 4 pizzas to a bundle of 4 burritos and 5 pizzas, which property of consumer preference is violated? What change in the assumptions could lead a rational consumer to prefer the first bundle?

Explain why most indifference curves are convex.

Draw the indifference curves for rock concerts and food for each of the following: (a)a typical 17-year-old (b)a typical 75-year-old

Draw the indifference curves for nickels and dimes. Would they ever have a non-constant slope? Explain.

Utility is the set of numerical values that A)yields an absolute level of pleasure from a bundle of goods. B)reflects the relative ranking of various bundles of goods. C)describes how much more a consumer prefers one bundle to another. D)yields a cardinal ranking of bundles.

If two bundles are on the same indifference curve, then A)the consumer derives the same level of utility from each. B)the consumer derives the same level of ordinal utility from each but not the same level of cardinal utility. C)no comparison can be made between the two bundles since utility cannot really be measured. D)B and C.

If the utility function (U)between food (F)and clothing (C)can be represented as U = , the marginal utility of food equals A) . B) . C)1/2 . D)1/2 .

If the utility function (U)between food (F)and clothing (C)can be represented as U = , the marginal utility of food A)is not positive. B)does not diminish as food increases. C)is not affected by the amount clothing. D)increases as one obtains more clothing.

If the utility function (U)between food (F)and clothing (C)can be represented as U = , the marginal rate of substitution of clothing for food equals A)-C/F. B)-F/C. C)- . D)- .

If Fred's marginal utility of pizza equals 10 and his marginal utility of salad equals 2, then A)he would give up 5 pizzas to get the next salad. B)he would give up 5 salads to get the next pizza. C)he will eat five times as much pizza as salad. D)he will eat five times as much salad as pizza.

If Fred's marginal rate of substitution of salad for pizza equals 5, then A)he would give up 5 pizzas to get the next salad. B)he would give up 5 salads to get the next pizza. C)he will eat five times as much pizza as salad. D)he will eat five times as much salad as pizza.

Adrian's total utilities of two consumption bundles are 50 and 100. This implies that A)the consumer prefers the first bundle. B)the consumer prefers the second bundle. C)the consumer likes the second bundle twice as much. D)the consumer likes the first bundle twice as much.

If the utility for two goods "x" and "y" is measured as U = x + y, then it can be concluded that A)"x" and "y" are perfect substitutes. B)"x" and "y" are perfect complements. C)"x" and "y" are both bads. D)the indifference curves on the x,y graph will be upward sloping.

Assuming that good "x" is measured on the x-axis and good "y" is measured on the y-axis, if the utility for the two goods "x" and "y" can be measured as U = x, then it can be concluded that A)"x" and "y" are perfect complements. B)"y" is a "bad". C)the indifference curves on the x,y graph are upward sloping. D)the indifference curves on the x,y graph are vertical.

Assuming that good "x" is measured on the x-axis and good "y" is measured on the y-axis, if the utility for the two goods "x" and "y" can be measured as U = y, then it can be concluded that A)"x" and "y" are perfect complements. B)"x" is a "bad". C)the indifference curves on the x,y graph are upward sloping. D)the indifference curves on the x,y graph are horizontal.

If two goods, "x" and "y", are perfect substitutes, then which of the following best represents the utility function for the two goods? A)U = x + y B)U = x ∗ y C)U = + D)Any of the above.

If Johnny likes homework (H)but hates exercise (E), which of the following might best represent his utility function for homework and exercise? A)U = H + E B)U = H/E C)U = + D)U = ×

Clifford lives by the motto "Eat, drink and be merry today, for tomorrow doesn't matter." If today's consumption is measured on the horizontal axis and tomorrow's consumption is measured on the vertical axis, Clifford's indifference curves A)are horizontal straight lines. B)are vertical straight lines. C)show decreasing utility as one moves upward. D)cannot be determined from the information given.

Clifford lives by the motto "Eat drink and be merry today, for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y", then which of the following best represents Clifford's utility function? A)U = x - y B)U = x/y C)U = x D)U = y

Some people view cosmetic surgery (c)and facials (f)as perfect substitutes as measured by the utility function U(c,f)= 5c + 10f. What is the marginal utility of cosmetic surgery? A)MU = 5. B)MU = 10. C)MU = 15. D)None of the above.

People view alcohol and marijuana as perfect substitutes. This means that A)individuals will consume either alcohol or marijuana, but not both, regardless of price. B)as the price of alcohol decreases, marijuana use decreases. C)the marginal utility for alcohol and marijuana is constant. D)Both B and C.

Individuals derive utility from picnics, p, and kayak trips, k. Assuming that an individual's utility is U(p,k)= k^0.5p^0.5 and income is $100, what is the marginal rate of substitution (MRS)between picnics and kayak trips? A)MRS = 1. B)MRS = -1. C)MRS = - D)There is no substitution because picnics and kayak trips are perfect complements.

If the utility function (U)between bananas (B)and jam (J)can be represented as U = 3ln(B)+4ln(J)the marginal utility of jam equals A)4B. B)3B/J. C)4/J. D)B/J.

If the utility function (U)between bananas (B)and jam (J)can be represented as U(B,J)= 3ln(B)+4ln(J), what is the marginal rate of substitution (MRS)between bananas and jam? A)4B. B)-3J/(4B). C)4/(3J). D)3B/J.

The absolute value of the slope of an indifference curve equals the ratio of the marginal utilities of the two goods involved.

What is the difference between ordinal and cardinal measurement?

Suppose Joe's utility for lobster (L)and soda (S)can be represented as U = L^0.5 S^0.5. Draw the indifference curve that yields a utility level of 9. Calculate the MUL, MUS, and MRS of L for S on that indifference curve when S = 3.

Joe's income is $500, the price of food (F)is $2 per unit, and the price of shelter (S)is $100. Which of the following represents his budget constraint? A)500 = 2F + 100S B)F = 250 - 50S C)S = 5 - .02F D)All of the above.

Joe's income is $500, the price of food (F)is $2 per unit, and the price of shelter (S)is $100. Which of the following represents his marginal rate of transformation of food for shelter? A)-5 B)-50 C)-.02 D)None of the above.

Joe's income is $500, the price of food (F)is $2 per unit, and the price of shelter (S)is $100. Which of the following represents his budget constraint? A)500 = 100F + 2S B)500 = 2F + 100S C)S = 500 - 2F D)All of the above.

Joe's budget constraint equals 500 = 2F + 100S, where $500 is Joe's income, $2 is the price of food (F)and $100 is the price of shelter (S). How much food can Joe buy if he buys one unit of shelter? A)2 units B)200 units C)250 units D)400 units

Joe's income is $500, the price of food (F)is $2, and the price of shelter (S)is $100. Which of the following bundles is in Joe's opportunity set? A)50 units of food, 5 units of shelter B)200 units of food, 2 units of shelter C)100 units of food, 1 unit of shelter D)150 units of food, 3 units of shelter

The marginal rate of transformation of y for x represents A)the slope of the budget constraint. B)the rate at which the consumer must give up y to get one more x. C)- / . D)All of the above.

Betty consumes good x and good y. If the price of x = $3 and the price of y = $4, then A)an extra unit of x costs 4/3 units of y. B)an extra unit of y costs 4/3 units of x. C)an extra unit of x costs 3/4 units of y. D)Both B and C.

If the price of one good increases while the price of the other good and the consumer's income remain unchanged, what will happen to the budget line? A)The budget line rotates inward from the intercept on the axis of the good that did not change in price. B)The budget line rotates outward from the intercept on the axis of the good that did not change in price. C)The budget line shifts inward without a change in slope. D)The budget line shifts outward without a change in slope.

Lisa eats both pizzas and burritos. If the price of a pizza increases, Lisa's opportunity set A)becomes larger. B)becomes smaller. C)is unchanged. D)cannot be determined without more information.

If the consumer's income increases while the prices of both goods remain unchanged, what will happen to the budget line? A)The budget line rotates inward from the intercept on the horizontal axis. B)The budget line rotates outward from the intercept on the vertical axis. C)The budget line shifts inward without a change in slope. D)The budget line shifts outward without a change in slope.

If the prices of both goods and income increase by the same percentage, what will happen to the budget line? A)The budget line rotates inward from the intercept on the axis of the good that did not change in price. B)The budget line rotates outward from the intercept on the axis of the good that did not change in price. C)The budget line shifts outward without a change in slope. D)Nothing.

A consumer buys food (F)and shelter (S). If the consumer's income rises and there is no change in the prices of F or S, the marginal rate of transformation of F for S will A)increase. B)decrease. C)stay the same. D)change, but there is not enough information to know how.

If both prices increases by 50%, A)budget constraint will be unchanged. B)slope of the budget constraint stay the same. C)slope of the budget constraint will decrease. D)budget constraint will shift outward in a parallel fashion.

If both prices decreases by 50%, A)budget constraint will be unchanged. B)slope of the budget constraint will increase. C)slope of the budget constraint will decrease. D)budget constraint will shift outward in a parallel fashion.

If a consumer's budget line for food (F)and shelter (S)is represented as F = 250 - 5S, we know that A)the consumer's income is 250. B)the price of shelter is 5. C)the price of shelter is 5 times the price of food. D)All of the above.

The intuition behind the budget constraint is that A)more options are preferred to less. B)money is the root of all happiness. C)information is power. D)scarcity is avoidable with prosperity.

Quotas, such as limiting the amount of residential water use during a drought, restricts an individual's preference set and A)reduces utility because an individual cannot consume as much as they would without the quota. B)increases utility because quotas restrict output and raise profits for the water company. C)reduces utility because an individual is forced to substitute to other goods. D)does not affect overall utility.

A consumer derives utility for "all other goods," g, and cigarettes, s. The price of "all other goods" equals $9 and the price of cigarettes is $10. Now suppose the government implements a $0.50 per-unit tax on cigarettes to encourage a decrease in smoking. How does the tax affect the marginal rate of transformation, MRT? A)The MRT will decrease to - . B)The MRT will increase to - . C)The MRT will increase to - + 0.05. D)The MRT will decrease to - - 0.05.

Suppose a taco costs $4 and a burrito costs $2. Moreover, this Mexican restaurant has a special deal. After you've bought 6 burritos, you can buy each extra burrito for $1.50. Assume that tacos are on the vertical axis and burritos on the horizontal axis. What is the marginal rate of transformation (MRT)when 8 burritos are purchased? A)MRT = 0.375 B)MRT = 0.50 C)MRT = 2 D)MRT = 2.67

-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. Which of the following choices Keith cannot afford? A)3 canned soups and 2 fresh soups B)2 canned soups and 1 fresh soup C)only 4 canned soups D)only 2 fresh soups

-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. What is the marginal rate of transformation (MRT)of Keith's budget constraint? A)MRT = -2 B)MRT = -1 C)MRT = -4 D)MRT = -0.5

The slope of the budget line represents the rate at which the consumer is willing to trade one good for another at any given bundle.

Joe subscribes to an Internet provider that charges $2 per hour. Draw his budget line for Internet access on the horizontal axis and money spent on all other goods on the vertical axis assuming he has $100 per month to spend. Another company offers unlimited Internet access for a flat monthly fee of $20. Draw this budget line.

Lisa has an income of $100. She spends all of her income on pizza and burritos. A pizza costs $10 and a burrito costs $5. However, the store where Lisa buys her burritos has a special deal. After you've bought 6 burritos, then you can buy each burrito for $2.50. Draw Lisa's opportunity set.

Explain the difference between the marginal rate of substitution and the marginal rate of transformation.

Economists assume consumers select a bundle of goods that maximizes their well-being subject to A)their budget constraint. B)their income. C)relative prices. D)their marginal rate of substitution.

An optimum that occurs as a corner solution A)includes only one good. B)cannot be an equilibrium. C)cannot exhaust the budget constraint. D)includes the exact same amounts of each good.

The consumer is in equilibrium when A)MRT = MRS. B) / = / . C)the budget line is tangent to the indifference curve at the bundle chosen. D)All of the above.

By selecting a bundle where MRS = MRT, the consumer is A)achieving a corner solution. B)reaching the highest possible indifference curve she can afford. C)not behaving in an optimal way. D)All of the above.

By selecting a bundle where MRS = MRT, the consumer is saying A)"I value my last unit of each good equally." B)"I am willing to trade one good for the other at the same rate that I am required to do so." C)"I will equate the amounts spent on all goods consumed." D)All of the above.

Assume the price of beer is $4, the price of pizza is $10 and the consumer's income is $250. Which consumption bundle will NOT be the consumer's choice? A)5 Beer, 5 Pizza B)0 Beer, 25 Pizza C)25 Beer, 15 Pizza D)None of the bundle will be chosen.

With respect to consuming food and shelter, two consumers face the same prices and both claim to be in equilibrium. We therefore know that A)they both have the same marginal utility for food. B)they both have the same marginal utility for shelter. C)they both have the same MRS of food for shelter. D)All of the above.

Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes. Due to differences in caffeine levels, his MRS of tea for coffee equals 2. If coffee and tea sell for the same price, Johnny will A)spend all $30 on tea. B)spend all $30 on coffee. C)spend $20 on coffee and $10 on tea. D)be indifferent between any bundle of coffee and tea costing $30.

-Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. Which bundle will Max choose? A)a B)b C)c D)d

-Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. What is the price of chicken? A)$0.80/lb B)$1.25/lb C)$4/lb D)$5/lb

-Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. If the price of burger increases, A)Max will buy less burger and more chicken. B)Max will buy less burger and the same quantity of chicken. C)Max will buy less of both meats. D)More information is needed to answer the question.

-Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. What happens if Max's mother gives him 10 pounds of burger? A)Max would have preferred receiving the dollar value of the burger. B)Max is indifferent between this gift and the dollar value of the burger. C)Max prefers this gift to the dollar value of the burger. D)None of the above.

-Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. What happens if Max's mother gives him 30 pounds of burger? A)Max would have preferred receiving the dollar value of the burger. B)Max is indifferent between this gift and the dollar value of the burger. C)Max prefers this gift to the dollar value of the burger. D)None of the above.

-Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. What happens if Max receives a $100 cash grant to buy either meat or chicken? A)Max will double his consumption of both meats. B)Max will spend it all on burger. Because of its lower price, he can buy more of it. C)Max will take advantage of the gift by buying all chicken because it is the more expensive meat. D)There is not enough information to answer the question.

-Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. Which of the following best describes Max's preferences? A)d > b > e B)d = b = e C)a = b > c D)a = b > e

-Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. Which of the following bundles are in Max's opportunity set? A)a, b, c B)b, d, e C)a, b, d D)None of the above.

-Max has allocated $100 toward meats for his barbecue. His budget line and indifference map are shown in the above figure. If the price of burger increases, which of the following bundles are in Max's opportunity set? A)b, d, e B)d, e C)a, b, c, d, e D)None of the labeled points are in Max's opportunity set.

-Max has allocated $100 toward meats for his barbecue. His budget line and indifference map are shown in the above figure. If Max is currently at point e, A)the absolute value of his MRS is less than the trade-off offered by the market. B)he is willing to give up more burger than he has to, given market prices. C)he is not maximizing his utility. D)All of the above.

-Max has allocated $100 toward meats for his barbecue. His budget line and indifference map are shown in the above figure. If Max is currently at point d, A)the absolute value of his MRS is larger than the trade-off offered by the market. B)he is willing to give up more chicken than he has to, given market prices. C)he is not maximizing his utility. D)All of the above.

Cash may be preferred to food stamps because additional cash A)rotates the budget constraint. B)shifts out the budget constraint at every point. C)provides a smaller opportunity set. D)allows the purchase of more food.

An interior solution to a consumer's utility maximization problem implies A)consuming a positive amount of all goods. B)consuming negative amounts of all goods. C)consuming less than optimal amounts of all goods. D)consuming more than an optimal amount of at least one good.

One reason more sport utility vehicles (SUVs)are driven in the United States than in Europe is A)different marginal rates of substitution. B)different marginal rates of transformation. C)the United States hasn't had a recession since 2000-2001. D)Either A or B

Those who criticize individuals who choose to drive a relatively inefficient sport utility vehicle (SUV)might mistakenly A)assume everyone faces the same relative prices. B)assume everyone has the same preference set. C)assume everyone has the same budget constraint. D)All of the above.

If the food stamp program in the United States moved from coupons redeemable for food to cash payments, A)everyone would buy less food and more of other goods. B)everyone would buy more food and less of other goods. C)some people might buy less food and obtain a higher level of utility. D)some people might buy less food and obtain a lower level of utility.

Rank-order the following three gifts in terms of potentially providing the highest utility to the lowest: ; 2)A gift card to a video game store; 3)Cash. A)1, 2, 3 B)2, 3, 1 C)3, 2, 1 D)1, 3, 2

What is one reason a gift card might be less desirable than cash? A)A gift card requires an individual to purchase from a particular store, which restricts the choice set. B)Cash requires an individual to purchase from a particular country, which restricts the choice set. C)Cash and the gift card are equally desirable, there is no problem here. D)Gift cards are easier to steal or lose relative to cash.

People derive utility in their lives from consuming goods (all other goods), g, and clean air (measured as the number of particulates removed per m³), a, as measured with the utility function U(g,a)= g^0.6a^0.4. The price index of consumer goods equals $20 per day. Income equals $1000. What is likely to happen to the number of asthma cases as the price of clean air (abatement cost)increases from $10 to $20? A)Asthma cases decrease because the particulates per m³ increase by 2 units. B)Asthma cases increase because the particulates per m³ decrease by 2 units. C)Asthma cases increase because the particulates per m³ increase by 2 units. D)There is not enough information to answer this question.

If income increases due to a decrease in taxes, then A)utility will increase because consumers can afford a larger bundle of goods. B)utility will fall because consumers will be forced to buy a smaller bundle of goods. C)utility will remain constant. D)utility will increase because consumers will be forced to buy a smaller bundle of goods.

Data shows that United States college students purchase more e-books than German college students. Assuming that all students have identical preferences for e-books and textbooks, what is the likely explanation for this result? A)Taxes on textbooks are higher in the United States than taxes on textbooks in Germany. B)Taxes on textbooks are lower in the United States than taxes on textbooks in Germany. C)The price of textbooks is cheaper in the United States than textbooks in Germany. D)Both A and C.

Robinson Crusoe is stranded on an island. He finds that coconuts are freely available (zero harvest cost), but fish are difficult to harvest and require a lot of energy. As a result, harvesting fish has a high price. If coconuts and fish are imperfect substitutes, what is Robinson Crusoe likely to consume? A)He will consume more coconuts than fish. B)He will consume more fish than coconuts. C)He will consume equal amounts of both goods. D)Not enough information is given.

An optimal choice in which a consumer does not consume all types of goods A)is a corner solution. B)cannot be an equilibrium. C)cannot exhaust the budget constraint. D)is an interior solution.

-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. What is Keith's utility maximization choice? A)4 canned soups and 4 fresh soups B)4 canned soups and 2 fresh soups C)only 4 canned soups D)only 2 fresh soups

-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

Consumers do not prefer gifts-in-kind to cash gifts.

If MRS > MRT, then the consumer is better off than at equilibrium.

Joe subscribes to an Internet provider that charges $2 per hour. He has $100 per month to spend and is at equilibrium by buying 10 hours of Internet access and $80 worth of other goods. Draw the indifference curve-budget line. If the company switches to a $20 monthly fee for unlimited Internet access, is Joe better off?

-Joe's indifference map for lobster and soda is shown in the above figure along with his budget line. Will Joe choose point a? Explain your answer in terms both of MRS and the level of utility.

-John is indifferent between canned soup and fresh soup. Canned soup sells for $1 per serving and fresh soup sells for $2 per serving. Assuming that John has allocated $4 toward soup, how will he spend it? Explain your answer by drawing John's budget line and indifference curves.

Suppose that left shoes and right shoes must be purchased separately. Ingrid needs an equal number of each type of shoe and has a budget of $100 for shoes. Left shoes always cost $1. If right shoes cost $19 each, how many of each will Ingrid buy? If the price of right shoes increases to $49 each, how will Ingrid react? Explain your answer by drawing the indifference curves-budget lines.

Johnny has $100 to spend on books and all other goods. Books cost $20 each and Johnny is at equilibrium consuming 3 books and $40 worth of other goods. Johnny's grandmom wants to give Johnny either a book or $20 for his birthday. Which gift does Johnny prefer? Explain using an indifference map and budget lines.

Lisa consumes only pizzas (P)and burritos (B). Her utility function is U = P^0.5 B^0.5. 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.

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?

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.

Behavioral economists use which technique to test economic theory? A)controlled experiments B)price theory C)environmental economics D)lie detector tests

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.

Which is a behavioral economics justification for limiting advertising directed towards children? A)Children have no money. B)Children pester their parents too much. C)Children have no memory. D)Children do not always have transitive preferences.

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 to provide an endowment for their children.

Which of the following might explain the evidence of an endowment effect in behavioral economics? A)government regulation B)knowledge and experience C)the federal tax code D)class envy

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.

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 a percentage of the adult population. B)everything else equal, the opt-in system of the United States would generate more organ donors as a percentage of the adult population. C)everything else equal, the opt-out system of Spain would generate more organ donors as a percentage of the adult population. D)everything else equal, the opt-out system of the United States would generate more organ donors as a percentage of the adult population.

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.

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.

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."

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.