ECO 365T Wk 4 – Practice Knowledge Check (2021 New)

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ECO 365T Wk 4 - Practice Knowledge Check (2021 New)
ECO 365T Wk 4 – Practice Knowledge Check (2021 New)
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ECO 365T Wk 4 – Practice Knowledge Check (2021 New)

 

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, X Units 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

 

 

When someone tries to “multitask” despite mounting evidence that multitasking is actually inefficient, this illustrates

Multiple Choice

  • confirmation bias.
  • the framing effect.
  • hindsight bias.
  • the availability heuristic.

 

 

The fact that specific areas of the human brain deal with specific sensations and activities like hearing, speech, and breathing is referred to as brain

Multiple Choice

  • heuristics.
  • specificity.
  • modularity.
  • myopia.

 

 

 

 

Refer to the graph. As the consumer equilibrium point shifts from point a to point b,

Multiple Choice

  • the consumer’s purchase of good 2 decreases even though its price stays constant.
  • the slope of the budget line decreases because the price of good 1 increased.
  • the marginal utility of good 1 increases and the marginal utility of good 2 decreases.
  • the consumer’s total utility decreases.

 

 

One major consequence of the framing effect is that

Multiple Choice

  • people may spend more to insure themselves against rare events but leave themselves uninsured against more common events.
  • someone could persist in pursuing a failed policy despite overwhelming evidence of the failure.
  • major business projects may create bottlenecks in the organization because they are not completed as scheduled.
  • decision makers may make faulty decisions if they are lulled by the environment in which they are making their decisions.

 

 

Which of the following sets of personal characteristics best reflects what behavioral economists assume about how people make decisions?

Multiple Choice

  • People are irrational, are prone to systematic errors, have stable preferences, and care about fairness.
  • People are rational, adjust for errors, have stable preferences, and easily resist temptation.
  • People care deeply about fairness, eagerly and accurately calculate ways to help others, assess future and present options equally well, and resist temptations in their selflessness.
  • People have preferences that depend on context, avoid and are bad at computation, often give in to temptation, and are often selfless in their behavior.

 

 

 

 

Refer to the diagram. The equilibrium points shown in the diagram, along with the price change that produced the shift of the budget line from ab to ac,

Multiple Choice

  • are consistent with a downsloping demand curve for product K.
  • imply that the consumer’s money income has declined, but his or her real income has increased.
  • imply consumer irrationality since the dearer product is being substituted for the cheaper product.
  • suggest that K is an inferior good.

 

 

 

 

Refer to the diagram. The budget line shift that moves the consumer’s equilibrium position from point A to point B suggests

Multiple Choice

  • an increase in the quantity of Y demanded.
  • a decrease in the quantity of Y demanded.
  • a leftward shift in the demand curve for Y.
  • a rightward shift in the demand curve for Y.

 

 

“Heuristics” used by the human brain are one of the reasons why

Multiple Choice

  • our preferences are quite stable and consistent.
  • neoclassical economic models accurately predict human behavior.
  • human perception is susceptible to context and prone to error.
  • the utility-maximizing model of decision making is precise.

 

 

Which of the following statements is ?

Multiple Choice

  • Marginal utility is the accumulation or summation of total utility.
  • Total utility is the accumulation or summation of marginal utility.
  • Total utility is the product of multiplying price times marginal utility.
  • Total utility is the change in marginal utility as quantity consumed increases.

 

 

Why do credit card companies typically require small minimum payment amounts on their customers’ monthly credit card statements?

Multiple Choice

  • Credit card companies are concerned that their customers will be put in financial distress if required to make higher payments.
  • Credit card companies want to promote faster repayment, and customers will be encouraged to pay more each month if they’re able to pay well beyond the minimum.
  • Credit card companies want to increase profits by promoting slower repayment, and actual customer payments will be anchored by the smaller payment requirements.
  • Credit card companies actually charge the highest minimum payment they are allowed by law to charge.

 

 

If you receive a gift whose market price is $20, but you consider it to be worth only $10, then

Multiple Choice

  • there is a $10, or 50 percent, value gain.
  • there may or may not be a value loss.
  • there is a $10, or 50 percent, value loss.
  • you can be relatively certain the giver was a sibling or other close relative.

 

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, X Units 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

 

 

 

 

Refer to the graph. As the consumer equilibrium point shifts from point a to point b,

Multiple Choice

  • the consumer’s purchase of good 2 decreases even though its price stays constant.
  • the slope of the budget line decreases because the price of good 1 increased.
  • the marginal utility of good 1 increases and the marginal utility of good 2 decreases.
  • the consumer’s total utility decreases.

 

 

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.

 

 

 

 

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

 

 

The tendency of people to discount long-term values more than they do near-term values—making many people “future blind”— is known in behavioral economics as

Multiple Choice

  • myopia.
  • anchoring.
  • framing effects.
  • time inconsistency.

 

 

Thea committed a traffic violation that resulted in an accident. She learns first that the violation will result in a $500 fine; she then learns that she will have to pay another $500 for damage caused in the accident. According to prospect theory,

Multiple Choice

  • she will suffer as much disutility from paying for the accident damage as she does from paying the fine.
  • she will suffer less disutility from paying for the accident damage than from paying the fine.
  • she will suffer more disutility from paying for the accident damage than from paying the fine.
  • she will feel less disutility from paying $1,000 than she would receive positive utility from receiving $1,000.

 

 

 

 

Refer to the graph. The shift of the budget line from AB to CD is consistent with

Multiple Choice

  • a decrease in the consumer’s money income.
  • a decrease in the prices of both Goods 1 and 2.
  • an increase in the prices of both Goods 1 and 2.
  • a decrease in the price of Good 1, and an increase in the price of Good 2.

 

 

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.

 

 

Which of the following do behavioral economists blame for why many households in sunny areas resist solar panels because they focus on the upfront installation costs instead of the larger long-run benefits that accrue from the solar panels?

Multiple Choice

  • framing effects
  • anchoring
  • myopia
  • time inconsistency

 

 

The facts that many people give to charity and that most people obey the law regardless of whether someone is watching or not, are field evidence for

Multiple Choice

  • the invisible hand.
  • fairness.
  • self-interest.
  • cognitive biases.

 

 

The dictator game and ultimatum game are experiments that have provided field evidence for

Multiple Choice

  • the invisible hand.
  • fairness.
  • self-interest.
  • cognitive biases.

 

 

Why do credit card companies typically require small minimum payment amounts on their customers’ monthly credit card statements?

Multiple Choice

  • Credit card companies are concerned that their customers will be put in financial distress if required to make higher payments.
  • Credit card companies want to promote faster repayment, and customers will be encouraged to pay more each month if they’re able to pay well beyond the minimum.
  • Credit card companies want to increase profits by promoting slower repayment, and actual customer payments will be anchored by the smaller payment requirements.

 

 

 

 

Refer to the diagram. Marginal utility

Multiple Choice

  • increases at an increasing rate.
  • becomes negative after consuming 4 units of output.
  • is found by dividing total utility by the number of units purchased.
  • cannot be calculated from the total utility information.

 

 

“Heuristics” used by the human brain refer to the

Multiple Choice

  • ability of the brain to make sophisticated and accurate mental processes.
  • shortcuts that the brain uses in order to process information.
  • elements in the brain that lead to consistent interpretation of all visual information.
  • mental processes that burn and often waste a lot of energy.

 

 

Which of the following is not an implication of hardwired heuristics?

Multiple Choice

  • Getting people to make positive behavioral changes is about putting them in situations where heuristics kick in and lead them to the desired outcome.
  • Getting people to make better decisions is simply a matter of providing more information and more options.
  • People who know and understand hardwired tendencies of others can take advantage of situations.
  • Even when confronted with irrefutable information that a behavior is detrimental, people still may not change what they’re doing.

 

 

If you receive a gift whose market price is $20, but you consider it to be worth only $10, then

Multiple Choice

  • there is a $10, or 50 percent, value gain.
  • there may or may not be a value loss.
  • there is a $10, or 50 percent, value loss.
  • you can be relatively certain the giver was a sibling or other close relative.

 

 

Assume initially that the price of X (the quantity of which is measured on the horizontal axis) is $9 and the price of Y (the quantity of which is measured on the vertical axis) is $4. If the price of X now declines to $6, the budget line will

Multiple Choice

  • be unaffected.
  • shift outward on the vertical axis.
  • shift inward on the horizontal axis.
  • shift outward on the horizontal axis.

 

 

Which of the following sets of personal characteristics best reflects what behavioral economists assume about how people make decisions?

Multiple Choice

  • People are irrational, are prone to systematic errors, have stable preferences, and care about fairness.
  • People are rational, adjust for errors, have stable preferences, and easily resist temptation.
  • People care deeply about fairness, eagerly and accurately calculate ways to help others, assess future and present options equally well, and resist temptations in their selflessness.
  • People have preferences that depend on context, avoid and are bad at computation, often give in to temptation, and are often selfless in their behavior.

 

 

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.

 

 

(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.