7, 8, 10

Question 1 of 21

1

Billy is deciding whether to watch TV at home or go spend time with his friends. If Billy decides to stay home, we can conclude that:

Select one of the following:

Billy is a homebody and never goes out
Billy will get more utility from watching TV than spending time with his friends
Billy will regret not spending more time with his friends
Billy's revealed preference is to always be alone

Explanation

Question 2 of 21

1

The concept of diminishing marginal utility:

Select one of the following:

explains why individuals rarely maximize their total utility
is the change in total utility that comes from consuming one additional unit of a good or service
is the principle that the additional utility gained from consuming successive units of a good or service tends to be smaller than the utility gained from the previous unit
is the principle that the additional utility gained from consuming different bundles of goods and services tend to be smaller than the utility gained from consuming just one bundle of goods and services

Explanation

Question 3 of 21

1

After watching a movie, Alan chooses not to watch a second and goes for a walk instead. Economists could explain his choices using the concept of:

Select one of the following:

budget constraints
diminishing marginal utility
income effect
substitution effect

Explanation

Question 4 of 21

1

Revealed preference is:

Select one of the following:

the idea that people's preferences can be determined by observing their choices and behavior
the notion that people reveal the utility they get by reporting it on a numerical scale
the method that psychologists, anthropologists, and economists use to measure utility
All of these are true

Explanation

Question 5 of 21

1

Sitting through a terrible movie until the end is an example of:

Select one of the following:

recognizing sunk costs
making a decision at the margin
irrational behavior
negative utility endorsement

Explanation

Question 6 of 21

1

In order to get children to eat all the food they've served, regardless of their hunger, mothers have relied for decades on the argument that "there are starving children in China." Assuming the presence of hungry children on another continent does not affect the utility you derive from the food on your plate, if you choose to force down food based on this argument, you are:

Select one of the following:

acting irrationally
acting rationally
caring more about starving children than your own well-being
doing your part in the fight against world hunger

Explanation

Question 7 of 21

1

An interesting application of behavioral economics is

Select one of the following:

time inconsistency
thinking irrationally about costs
forgetting the fungibility of money
All of these are interesting applications

Explanation

Question 8 of 21

1

Assume Willow's income to spend on either earrings or hairbands is $24. If her budget constraint is pictured in the graph shown, which of the following must be true?

Select one of the following:

Headbands must cost $3, and earrings must cost $6
Headbands must cost $8, and earrings must cost $4
Willow will buy more headbands than earrings because they are less expensive
Willow will buy more earrings than headbands because they are less expensive

Explanation

Question 9 of 21

1

If the price of earrings is reduced 50%:

Select one of the following:

Willow’s real income increased
Willow will switch her purchases from hairbands to earrings
Willow can buy more earrings and hairbands
All of these are possible

Explanation

Question 10 of 21

1

Time inconsistency refers to a situation where:

Select one of the following:

we change our minds about what we want in response to gaining complete information
we change our minds about what we want simply because of the timing of the decision
we typically choose the same thing, regardless of when the decision is being made
None of these statements is true

Explanation

Question 11 of 21

1

When we say money is fungible, we mean a dollar from savings:

Select one of the following:

is exactly the same as a dollar from your checking account
is earmarked for that purpose and can't be spent on everyday expenses like groceries
is not substitutable with any other dollar you have
is obviously worth more than the dollar you have in your pocket

Explanation

Question 12 of 21

1

Mark has $2000 in savings. Over Christmas break, he puts over $500 on his credit card and pays it off gradually over the spring semester. An economist might observe that behavior as:

Select one of the following:

rational
misallocated
scarce
irrational

Explanation

Question 13 of 21

1

Rick finds a great Internet deal on an all-inclusive vacation rental in the Tropics for $1200, and immediately places a $1000 nonrefundable deposit on it. He later learns that the dates he planned to go are right in the middle of hurricane season, and it is likely to be miserable and potentially dangerous weather the entire time. Rick decides he cannot waste the $1000 and takes the trip anyway. While sitting in the rain, miserable, Rick realizes he should have been more rational and:

Select one of the following:

ignored his sunk cost of $1000
ignored his sunk cost of $1200
considered his sunk cost of $1000
considered his sunk cost of $200

Explanation

Question 14 of 21

1

An example of someone who irrationally considers sunk costs when making a decision is most likely:

Select one of the following:

someone who paid $50 for a ticket to a baseball game and ends up sitting through the entire game in the freezing rain without a jacket
a family that pays $20 to enter a state park for the day and leaves after an hour
a family that pays $20 to enter a state park for the day and stays all day
someone who paid $50 for a ticket to a baseball game and ends up sitting through the entire game enjoying himself

Explanation

Question 15 of 21

1

Careless drivers being more likely to buy auto insurance voluntarily is an example of:

Select one of the following:

moral hazard
adverse selection
asymmetric selection
information optimization

Explanation

Question 16 of 21

1

Applying the idea of time inconsistency, we can say that, in general, a person's "future-oriented self":

Select one of the following:

has the same objectives as the present-oriented self, just articulates it differently
tends to choose healthier decisions, and the present-oriented self gives into temptation more easily
is less rational in decision-making, because that self rarely matches actual behavior
is more rational in decision-making, because the choices are generally healthier or more altruistic

Explanation

Question 17 of 21

1

Buddy has $2000 in a checking account and wants to buy a new Macbook for $1100. Buddy decides he needs the money in his account to pay his bills next month and so puts the $1100 on his credit card and pays it off gradually over the next several months. Buddy choosing to "save" his cash on hand for everyday expenses is:

Select one of the following:

rational, since Buddy can now pay all his bills with a small credit card payment each month
going to make Buddy wealthier in the long run
irrational, since money is fungible
rational, since he has his new computer and has money in the bank

Explanation

Question 18 of 21

1

Problems are likely to arise when

Select one of the following:

one person knows more than another
complete information is impossible to obtain
people have good enough information to make acceptable choices
None of these statements is true

Explanation

Question 19 of 21

1

An example of a market subject to adverse selection would be:

Select one of the following:

the market for soft drinks
the market for lawn mowers
the insurance market
the market for sunglasses

Explanation

Question 20 of 21

1

In the principal-agent problem, the principal is:

Select one of the following:

a person who carries out a task on someone else's behalf
a person who is in charge of an educational system
a person who is the source of the problem
a person who entrusts someone with a task

Explanation

Question 21 of 21

1

The tendency for people to behave in a riskier way or to renege on contracts when they do not face the full consequences of their actions is called

Select one of the following:

counter information
collective bargaining
moral hazard
adverse selection

	Created by merrileegibbsdavolt over 9 years ago

Quiz on 7, 8, 10, created by merrileegibbsdavolt on 05/11/2014.

7, 8, 10

Question 1 of 21

Billy is deciding whether to watch TV at home or go spend time with his friends. If Billy decides to stay home, we can conclude that:

Select one of the following:

Explanation

Question 2 of 21

The concept of diminishing marginal utility:

Select one of the following:

Explanation

Question 3 of 21

After watching a movie, Alan chooses not to watch a second and goes for a walk instead. Economists could explain his choices using the concept of:

Select one of the following:

Explanation

Question 4 of 21

Revealed preference is:

Select one of the following:

Explanation

Question 5 of 21

Sitting through a terrible movie until the end is an example of:

Select one of the following:

Explanation

Question 6 of 21

Select one of the following:

Explanation

Question 7 of 21

An interesting application of behavioral economics is

Select one of the following:

Explanation

Question 8 of 21

Assume Willow's income to spend on either earrings or hairbands is $24. If her budget constraint is pictured in the graph shown, which of the following must be true?

Select one of the following:

Explanation

Question 9 of 21

If the price of earrings is reduced 50%:

Select one of the following:

Explanation

Question 10 of 21

Time inconsistency refers to a situation where:

Select one of the following:

Explanation

Question 11 of 21

When we say money is fungible, we mean a dollar from savings:

Select one of the following:

Explanation

Question 12 of 21

Mark has $2000 in savings. Over Christmas break, he puts over $500 on his credit card and pays it off gradually over the spring semester. An economist might observe that behavior as:

Select one of the following:

Explanation

Question 13 of 21

Select one of the following:

Explanation

Question 14 of 21

An example of someone who irrationally considers sunk costs when making a decision is most likely:

Select one of the following:

Explanation

Question 15 of 21

Careless drivers being more likely to buy auto insurance voluntarily is an example of:

Select one of the following:

Explanation

Question 16 of 21

Applying the idea of time inconsistency, we can say that, in general, a person's "future-oriented self":

Select one of the following:

Explanation

Question 17 of 21

Select one of the following:

Explanation

Question 18 of 21

Problems are likely to arise when

Select one of the following:

Explanation

Question 19 of 21

An example of a market subject to adverse selection would be:

Select one of the following:

Explanation

Question 20 of 21

In the principal-agent problem, the principal is:

Select one of the following:

Explanation