Quiz 4: Consumer Preferences

Which of the following is NOT a reason why economists are interested in understanding consumer behavior? A) Economists are often called upon to evaluate public policies that impact the well-being of consumers. B) It is important for businesses to be able to accurately predict consumers' choices. C) Economists want to understand the conditions under which trade will take place. D) Economists want to predict the value of a company's stock.

The idea that all potentially available alternatives can be ordered according to a consumer's preferences is called: A) the consumption principle. B) the ranking principle. C) the choice principle. D) the more-is-better principle.

When comparing two alternatives X and Y,a consumer either prefers X to Y,prefers Y to X,or is indifferent between them.This property is called: A) transitivity. B) completeness. C) the ranking principle. D) the choice principle.

If an individual prefers X to Y and prefers Y to Z then the consumer must also prefer X to Z.This property is called: A) transitivity. B) completeness. C) the ranking principle. D) the choice principle.

When faced with all available alternatives,the consumer will select the one that is ranked the highest.This principle is called: A) the choice principle. B) the ranking principle. C) the consumption principle. D) the more-is-better principle.

According to the more-is-better principle: A) a consumer will always select the bundle that is ranked highest among all alternative bundles. B) a consumer will prefer a bundle that has the largest amount of the good they prefer most. C) consumers always try to achieve the highest possible level of well-being. D) when comparing consumption bundles, a consumer prefers a bundle that has more of every good.

Netflix.com asks its customers to rate the videos they have watched.This information is then used to rank videos for other Netflix.com subscribers.These subscribers can then use the video rankings to help them decide on a video to rent.Through this process,Netflix.com is helping its customers apply the: A) ranking principle. B) choice principle. C) more-is-better principle. D) the indifference principle.

The decisions consumers make about which goods to consume are interrelated because: A) the enjoyment of one good often depends on the consumption of other goods. B) consumers have perfect information regarding all possible consumption bundles. C) consumers can't always distinguish between goods. D) consumers are often indifferent between different goods.

Refer to Table 4.1.If Mike starts with 3 CDs and 2 economics books,would he be willing to trade one CD for an economics book? A) Yes, because the bundle with 2 CDs and 3 economics books is ranked higher than the bundle with 3 CDs and 2 economics books B) No, because the bundle with 2 CDs and 3 economics books is ranked higher than the bundle with 3 CDs and 2 economics books C) Yes, because the bundle with 3 CDs and 2 economics books is ranked higher than the bundle with 2 CDs and 3 economics books D) No, because the bundle with 3 CDs and 2 economics books is ranked higher than the bundle with 2 CDs and 3 economics books

Refer to Table 4.1.If Mike starts with 4 CDs and 1 economics book,would he be willing to trade one CD for two economics books? A) Yes, because the bundle with 3 CDs and 3 economics books is ranked higher than the bundle with 4 CDs and 1 economics book B) No, because the bundle with 3 CDs and 3 economics books is ranked higher than the bundle with 4 CDs and 1 economics book C) Yes, because the bundle with 4 CDs and 1 economics book is ranked higher than the bundle with 3 CDs and 3 economics books D) No, because the bundle with 4 CDs and 1 economics book is ranked higher than the bundle with 3 CDs and 3 economics books

Refer to Table 4.1.Mike's preferences are consistent with the More-Is-Better Principle because: A) the two goods are perfect substitutes. B) there are no empty cells. C) in each column, the choices at the top are ranked lower than the choices at the bottom. D) in each column, the choices at the top are ranked higher than the choices at the bottom.

Refer to Table 4.1.Mike's preferences are consistent with the Ranking Principle because: A) the two goods are perfect complements. B) there are no empty cells. C) in each column, the choices at the top are ranked lower than the choices at the bottom. D) in each column, the choices at the top are ranked higher than the choices at the bottom.

A curve that shows all of the alternative consumption bundles that the consumer likes equally well is called: A) a budget constraint. B) an indifference curve. C) an individual demand curve. D) a consumption bundle curve.

If the more-is-better principle holds,two different consumption bundles can't be equally attractive unless: A) they contain the same amounts of each good. B) the consumer is unable to rank both bundles. C) as the consumer gives up some of one good, the consumer is given more of the other good. D) they each cost the same amount to purchase.

Which of the following is NOT a property of indifference curves? A) Indifference curves are thin. B) Indifference curves may slope upward or downward. C) Indifference curves from the same family never cross. D) A consumer prefers to be on the indifference curve that is farthest from the origin.

According to Figure 4.1,which of the following statements is true? A)Bundle A would be preferred to bundle C. B)Bundle A would be preferred to bundle B. C)Bundle C would be preferred to bundle D. D)Bundle B would be preferred to bundle A.

If the more-is-better principle holds,then indifference curves must: A) be positively-sloped. B) be negatively-sloped. C) be thin. D) be concave.

If two consumption bundles lie on the same indifference curve,then: A) the consumer prefers the bundle that is farthest from the origin. B) the consumer does not prefer one bundle over the other. C) the consumer prefers the bundle that is farthest to the right on the indifference curve. D) the consumer prefers the bundle that is farthest to the left on the indifference curve.

Teresa consumes both steak and lobster.Suppose the formula for her indifference curves is S = U - 1.5L,where S stands for the number of steaks,L stands for the number of lobsters,and U represents utility.Which of the following bundles would Teresa prefer? A) 10 steaks and 4 lobsters B) 9 steaks and 5 lobsters C) 12 steaks and 2 lobsters D) There is not enough information to answer the question.

Dane consumes both hamburgers and pizza.Suppose the formula for his indifference curves is H = U - 2 P,where H stands for the number of hamburgers,P stands for the number of pizzas,and U represents utility.Which of the following statements is true? A) Dane prefers a consumption bundle with 5 hamburgers and 4 pizzas to a consumption bundle with 10 hamburgers and 2 pizzas. B) Dane prefers a consumption bundle with 8 hamburgers and 3 pizza to a consumption bundle with 14 hamburgers and 1 pizzas. C) Dane is indifferent between a consumption bundle with 10 hamburgers and 2 pizzas and a consumption bundle with 8 hamburgers and 3 pizzas. D) Dane is indifferent between a consumption bundle with 5 hamburgers and 4 pizzas and a consumption bundle with 8 hamburgers and 3 pizzas.

A "bad" would be associated with: A) zero marginal utility. B) a very small amount of marginal utility. C) negative marginal utility. D) positive marginal utility.

Suppose Addison is a big fan of jazz music,and that he likes opera music very little.What would his family of indifference curves look like? A) Negatively sloped, with higher levels of utility represented by indifference curves that are closer to the origin B) Positively sloped, with higher levels of utility represented by indifference curves that are closer to the origin C) Negatively sloped, with higher levels of utility represented by indifference curves that are farther from the origin D) Positively sloped, with higher levels of utility represented by indifference curves that are farther from the origin

For any given family of indifference curves,a consumer would prefer to be at a point: A) on the indifference curve that is closest to the origin. B) that is far to the right on an indifference curve. C) that is far to the left on an indifference curve. D) on the indifference curve that is farthest from the origin.

Which of the following would be inconsistent with the More-Is-Better Principle? A) Indifference curves with negative slopes B) Indifference curves that cross C) Indifference curves that are L-shaped D) Indifference curves that are parallel to one another

The slope of an indifference curve tells us: A) the marginal utility the consumer receives from consuming an additional unit of a good. B) how much of one good is required to compensate the consumer for giving up some of another good. C) the amount of utility a consumer receives from consuming a bundle of goods. D) the rate at which utility changes as more of one good is consumed.

The rate at which a consumer will exchange one good for another is called: A) marginal utility. B) the marginal rate of transformation. C) the rate of substitutability. D) the marginal rate of substitution.

Higher rates of substitution are indicated by _______ values of the marginal rate of substitution. A) small negative B) large negative C) small positive D) large positive

Intuitively,the marginal rate of substitution for X with Y tells us: A) how much Y a consumer needs to compensate them for a one-unit decrease in X. B) how much X must be taken away from a consumer to compensate them for a one-unit increase in Y. C) how much X a consumer needs to compensate them for a one-unit decrease in Y. D) how much more Y the consumer will buy if the price of Y increases by $1.

The marginal rate of substitution between two goods is given by: A) the inverse of the slope of an indifference curve. B) the slope of a line tangent to an indifference curve. C) negative one times the inverse of the slope of an indifference curve. D) negative one times the slope of a line tangent to an indifference curve.

Rates of substitution are determined by: A) the consumer's income. B) the consumer's preferences. C) the number of available consumption bundles. D) the prices of different goods.

As we move down and to the right along an indifference curve,the marginal rate of substitution: A) increases. B) decreases. C) remains constant. D) increases, then decreases.

Refer to Figure 4.2.The marginal rate of substitution for economics books with CDs is highest at point: A)A. B)B. C)C. D)D.

A marginal rate of substitution formula tells us: A) the rate at which the consumer is willing to exchange one good for another, given the level of utility. B) the rate at which the consumer is willing to exchange one good for another, given the amounts consumed. C) the rate at which the consumer is willing to exchange one good for another, given the consumer's income. D) the rate at which the consumer is willing to exchange one good for another, given the prices of the goods.

Suppose a consumer's MRS is given by the formula MRS_PT = T/P,where P stands for the number of pieces of pizza and T stands for the number of tacos.Starting at 12 tacos and 4 pizzas,the consumer must receive: A) 3 tacos to compensate them for the loss of one piece of pizza. B) 3 pieces of pizza to compensate them for the loss of one taco. C) 1/3 taco to compensate them for the loss of one piece of pizza. D) 1/3 piece of pizza to compensate them for the loss of one taco.

Suppose Joe's MRS for cookies with crackers is 6 crackers per cookie.Also assume that Mary's MRS for cookies with crackers is 3 crackers per cookie.Assuming that these rates of substitution don't depend on the amounts consumed,which of the following trades would make both Joe and Mary better off? A) Joe gives Mary 5 crackers in exchange for a cookie. B) Joe gives Mary 2 crackers in exchange for a cookie. C) Joe gives Mary 6 crackers in exchange for a cookie. D) There is not enough information to answer the question.

Suppose Bart's MRS for sodas with chips is 6 bags of chips per soda.Also assume that Lisa's MRS for sodas with chips is 8 bags of chips per soda.Assuming that these rates of substitution don't depend on the amounts consumed,which of the following trades would make Bart and Lisa better off? A) Bart gives Lisa 9 bags of chips in exchange for a soda. B) Bart gives Lisa 7 bags of chips in exchange for a soda. C) Bart gives Lisa 6 bags of chips in exchange for a soda. D) None of these trades is mutually beneficial.

Refer to Figure 4.3.Which diagram most likely represents the indifference map for Sony PlayStations and Nintendo GameCubes? A) A B) B C) C D) D

Refer to Figure 4.3.Which diagram most likely represents the indifference map for left shoes and right shoes? A) A B) B C) C D) D

Refer to Figure 4.3.Which diagram most likely represents the indifference map for a good and a "bad"? A) A B) B C) C D) D

Two products are perfect substitutes if: A) a consumer is willing to swap one for another at a fixed rate. B) they are valuable only when used together in fixed proportions. C) their indifference curves are L-shaped. D) an increase in the price of one good causes a decrease in the demand for the other good.

Two products are perfect complements if: A) a consumer is willing to swap one for another at a fixed rate. B) they are valuable only when used together in fixed proportions. C) their indifference curves are straight lines. D) they lie on the same indifference curve.

Suppose Frank is completely indifferent between drinking Coke and drinking Pepsi.Then Frank's indifference curves for Coke and Pepsi would be: A) linear. B) L-shaped. C) convex. D) positively-sloped.

Felix always consumes exactly four cookies with a glass of milk.Felix's indifference curves for cookies and milk would be: A) linear. B) L-shaped. C) convex. D) positively-sloped.

When there is a high degree of complementarity between two products,then the indifference curves will: A) be reasonably close to straight lines. B) be perfectly straight lines. C) bend sharply. D) be positively sloped.

When there is a low degree of complementarity between two products,then their indifference curves will: A) be relatively straight. B) be perfectly straight lines. C) bend sharply. D) be positively sloped.

A utility function is a mathematical formula that assigns to each consumption bundle a numeric value that represents the: A) opportunity cost of consuming the bundle. B) consumer's relative well-being from consuming the bundle. C) price the consumer would pay for the bundle. D) rates of substitution of the goods in the bundle.

Stewie enjoys watching DVDs and listening to his iPod.Suppose his utility function is given by U(D,I)= 3D + 4(D × I),where D is the number of hours he spends watching DVDs and I is the number of hours he spends listening to his iPod.Which of the following combinations will provide Stewie with the greatest amount of satisfaction? A) 4 hours of watching DVDs and 8 hours of listening to his iPod B) 6 hours of watching DVDs and 6 hours of listening to his iPod C) 2 hours of watching DVDs and 10 hours of listening to his iPod D) 8 hours of watching DVDs and 6 hours of listening to his iPod

When the more-is-better principle holds,we assign higher utility values to indifference curves: A) that are closer to the origin. B) that are farther from the origin. C) that are concave. D) that are L-shaped.

Which of the following statements regarding preferences and indifference curves is true? A) When choosing between two consumption bundles, a consumer will always prefer the consumption bundle on the lower indifference curve. B) A consumer is indifferent between two consumption bundles that are on the same indifference curve. C) When choosing between two consumption bundles, a consumer will always prefer the consumption bundle that is farthest to the right on an indifference curve. D) When choosing between two consumption bundles, a consumer will always prefer the consumption bundle that is farthest to the left on an indifference curve.

Information about preferences is ordinal if: A) the information tells us something about the intensity of the consumer's preferences. B) the information allows us to make comparisons between the preferences of different consumers. C) the information allows us to determine only whether one alternative is better or worse than another. D) the information allows us to make comparisons between the preference of the same consumer at different points in time.

In modern microeconomic theory,utility functions summarize: A) cardinal information about preferences. B) ordinal information about preferences. C) absolute information about preferences. D) both cardinal and ordinal information about preferences.

According to influential moral philosopher Jeremy Bentham: A) utility functions should provide cardinal information about preferences. B) the aim of public policy should maximize an individual's utility. C) utility functions should provide ordinal information about preferences. D) public policy decisions should be based on ordinal utility.

From the modern "ordinalist" perspective,the scale used to measure utility: A) provides an absolute measure of human well-being. B) is completely arbitrary. C) summarizes information about the intensity of preferences. D) is the same for each consumer.

From the modern "ordinalist" perspective,when we change the scale used to measure utility: A) the consumers indifference curves remain unchanged. B) the consumers indifference curves will shift in the same direction as the change in the scale used to measure utility. C) the consumers indifference curves will shift in the opposite direction as the change in the scale used to measure utility. D) consumers will "move along" their indifference curves.

Marginal utility: A) is the change in a consumer's utility resulting from the addition of a very small amount of some good. B) is the total utility a resulting from consuming some good, divided by the amount consumed. C) is the change in a consumer's utility resulting from the addition of a very small amount of some good, divided by the amount added. D) is the change in a consumer's utility resulting from the addition of a very small amount of some good, divided by the total amount being consumed.

If Anne receives more satisfaction as she consumes more shoes,then: A) the marginal utility of shoes is positive. B) the marginal utility of shoes is negative. C) the marginal utility of shoes is constant. D) the marginal utility of shoes is zero.

If consuming more of a good doesn't affect a consumer's well-being,then: A) the marginal utility of the good is positive. B) the marginal utility the good is negative. C) the marginal utility the good is constant. D) the marginal utility the good is zero.

Which of the following correctly expresses the relationship between the marginal utilities of two goods and marginal rate of substitution between the goods? A) MRS_XY = (MU_Y/MU_X) B) MRS_XY = (MU_X/MU_Y) C) MRS_XY = (U/∆X) D) MRS_XY = (U/∆Y)

Ultimately,the opportunity for mutually beneficial trade between two individuals is based on: A) the marginal utilities each consumer derives from each good. B) the price each consumer is will to pay for each good. C) the degree of substitutability of each good. D) a comparison of the individuals' utility function.

By itself,the marginal utility of a particular good: A) provides important information about a consumer's preferences. B) tells us how much a consumer would pay for the good. C) tells us how much the consumer values the good. D) is completely meaningless.

Frieda enjoys cooking and baking.Her utility function is U(C,B)= 6C + 3B,where C is the number of hours she spends cooking and B is the hours she spends baking.What is Frieda's MU of cooking? A) 1/6 B) 2 C) 6 D) It cannot be determined from the given information.

Frieda enjoys cooking and baking.Her utility function is U(C,B)= 6C + 3B,where C is the number of hours she spends cooking and B is the hours she spends baking.What is Frieda's MRS of cooking with baking? A) 1/6 B) 2 C) 6 D) It cannot be determined from the given information.

Owen and Simon both like playing with balls and cars.Suppose B represents the number of balls,and C represents the number of cars.If Owen's utility function can be given by U(B,C)= 10B + 5C,and Simon's utility function can be given by U(B,C)= 6B + 6C,which of the following trades would be mutually beneficial? A) Owen gives Simon 3 cars in exchange for 2 balls B) Owen gives Simon 2 cars in exchange for 3 balls C) Owen gives Simon 3 balls in exchange for 2 cars D) Owen gives Simon 2 balls in exchange for 3 cars

Owen and Simon both like playing with balls and cars.Suppose B represents the number of balls,and C represents the number of cars.If Owen's utility function can be given by U(B,C)= 10B + 5C,and Simon's utility function can be given by U(B,C)= 6B + 6C,which of the following trades would benefit Simon but not Owen? A) Owen gives Simon 3 cars in exchange for 2 balls B) Owen gives Simon 2 cars in exchange for 3 balls C) Owen gives Simon 3 balls in exchange for 2 cars D) Owen gives Simon 2 balls in exchange for 3 cars

Refer to carefully-labeled diagrams to explain each of the following: a.Indifference curves are thin. b.Indifference curves do not slope upward. c.Indifference curves from the same family do not cross.

Using a carefully-labeled graph,explain the concept of declining marginal rate of substitution.Why would we expect indifference curves to exhibit this characteristic?

Suppose that Frank is considering giving Mike eight paperback books in exchange for 2 CDs.Explain the conditions under which this trade would be mutually beneficial.Also explain the conditions under which Frank and Mike won't make the trade.

Consider two activities: Attending economics class and reading an economics textbook.Zack thinks he can learn economics by either attending class or reading the textbook.Zoe knows she learns best by both attending class and reading the textbook.Use indifference curves to illustrate each person's preferences for attending class and reading the text.

Compare and contrast cardinal utility and ordinal utility.Which concept is sufficient for ranking consumers' preferences? Why?

Homer and Marge both enjoy lasagna and wine.Homer's utility function is given by U(L,W)= 12L + 4W.Marge's utility function is given by U(L,W)= 2L + 2W.In each function,L stands for plates of lasagna and W stands for glasses of wine.Would Homer and Marge agree to a trade in which Homer gives Marge a plate of lasagna in exchange for two glasses of wine?

Harriet enjoys watching both American Idol and Desperate Housewives on television.Her preferences correspond to the utility function U(A,D)= 2A + 4√D,where A stands for the number of hours she watches American Idol and D is the number of hours she watches Desperate Housewives. a.How would Harriet rank the following alternatives: 4 hours of American Idol and 2 hours of Desperate Housewives,2 hours of American Idol and 4 hours of Desperate Housewives and 3 hours of American Idol and 3 hours of Desperate Housewives? b.Suppose that one week,Desperate Housewives is not shown,but there is a two-hour American Idol special (instead of the usual one-hour program).Is Harriet better off or worse off? Explain. c.Would Harriet's preferences change if her utility function was expressed as U(A,D)= 2A + 4√D+6? Why or why not?