Consumer Choice and Demand

According to MU theory, consumers maximize satisfaction when they

• can get much more of one good than another.

• can get credit and spend beyond their income levels.

• equalize marginal utility per dollar of all goods consumed.

• are completely satisfied with all goods consumed.

A piece of pizza costs $4 and gives 60 utils; a salad costs $3 and gives 40 utils. Which item should we consumer next?

• pizza

• salad

• both

The principle of diminishing marginal utility can be used to explain:

• Why my daughter loves eating candy more than my son.

• Why my children will be so exited for candy on Halloween night but get tired of eating it over the next week.

• Why all children love candy.

What behavioral factor(s) explain why students are hesitant to drop a course even though it looks like they are going to fail?

• Absolute vs. Relative Thinking

• Framing

• Endowment Effect

• Sunk cost fallacy and overconfidence

A budget constraint shows us

• the different combinations of 2 goods that we can produce with a given income.

• the different combinations of 2 goods that we can consume with a given income.

• the different combinations of 2 goods that are available for purchase.

• nothing.

All of the following are examples where humans violate the rationality assumption except

• framing bias.

• sunk cost fallacy.

• making decisions after considering all of the available options.

• overvaluing the present.

An indifference curve shows us

• points of consumption that we cannot obtain.

• points of consumption that all bring the same amount of utility.

• points of consumption that provide a wide-range of utility.

• our budget limitations.

The Diamond/Water Paradox shows us that prices are based on

• total utility

• marginal utility

• a combination or total and marginal utility

• average utility

Which of the following is a sunk cost?

• The cost of driving to see your sister in Chicago next weekend.

• The price of a movie ticket that you plan to purchase this Friday.

• The deposit you paid on a cruise that you plan to go on this summer with friends.

• The amount of groceries you need to buy this weekend to cook a special meal for your family.

Bert and Ernie are discussing wealth and income inequality in the U.S. Bert says that large amounts of inequality are shown to have really negative impacts on society. Ernie says that inequality doesn't have any major effects, either negatively or positively. Cookie monster pops up and says that inequality is not a problem in the U.S. Who is correct?

• Bert

• Ernie

• Cookie Monster