Chp 7 Flashcards
Economists assume that the goal of consumers is to
make themselves as well off as possible.
Marginal utility is the
extra satisfaction received from consuming one more unit of a product.
If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is
57 utils.
Which of the following is likely to occur as the result of the law of diminishing marginal utility?
Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant.
If a consumer always buys goods rationally, then
the marginal utility per dollar spent on all goods will be equal.
There are two conditions necessary for a consumer to maximize her utility. One is that the marginal utilities per dollar spent on each good and service consumed are equal. What is the other condition?
Total spending on all goods and services must equal the amount available to be spent.
Along a downward - sloping linear demand curve,
the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases.
We can derive the market demand curve for gold earrings
by adding horizontally the individual demand curves of each gold earring consumer.
Which of the following is used to explain why a consumer’s willingness to buy Microsoft Office increases as the number of other people who use Microsoft Office increases?
network externalities
Economists have used ________ and ________ in experiments designed to determine whether consumers care about fairness when they make decisions.
the ultimatum game; the dictator game
Which of the following refers to the increase in the usefulness of a product as the number of consumers who use it increases?
network externalities
Sunk costs
are costs that have already been paid and cannot be recaptured in any significant way.
Firms that automatically enroll their employees in retirement plans, giving them the option to opt-out instead of to opt-in, is an example of a form of behavioral economics known as
nudges
Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time. In less than a week she discovered that the shoes were uncomfortable. Grace went back to wearing her old pair and stashed away the new pair. When asked by her boss, Mme Ramotswe, why does she not simply give away the new pair, she said: “But I paid so much for it.”
ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give it away or not.
All of the following are key trends that have hurt department stores except
building rent in shopping malls has become so expensive that department stores are having trouble earning profits despite experiencing record sales volume.
