......CONSUMER BEHAVIOUR.....

Question 1

Who said: “The theory of economics must begin with a correct theory of consumption.”

Jeremy Bentham

Stanley Jevons

Adam Smith

Don’t know

Question 2

Who is the father of Utility Theory?

Jeremy Bentham

Stanley Jevons

Adam Smith

Don’t know

Question 3

Consumer theory is based on a theory of:

Income redistribution

Self-interest

The public interest

Don’t know

Question 4

Which of these are critical components of consumer choice?

The pleasure people get from consuming a good

The price they have to pay for it

The income or budget available to them to exercise their choices

All of the above

Don’t know

Question 5

Which measure of utility simply ranks goods relative to one another?

Cardinal

Ordinal

Subliminal

Don’t know

Question 6

The utility-maximizing rule or equimarginal principle allows us to:

Derive the downward-sloping demand curve

Derive the upward-sloping supply curve

Determine equilibrium in the market

Don’t know

Question 7

Suppose you go to a restaurant and have duck orange with wild rice but a second serving doesn’t taste nearly as good. This is an example of:

Increasing Cardinal Utility

Diminishing Marginal Utility

Diminishing Ordinal Utility

Don’t know

Question 8

Which of these are examples in microeconomics of optimizing behavior?

1. Consumers maximize utility subject to a budget constraint

2. Firms maximize profits

Both 1 and 2

Don’t know

Question 9

According to the equimarginal principle, utility is maximized when the marginal utility of the last dollar spent on each good is:

Exactly the same as the marginal utility of the last dollar spent on any other good

Greater than the marginal utility of the last dollar spent on any other good

Less than marginal utility of the last dollar spent on any other good

Don’t know

Question 10

Suppose that the price of Dove Bars (ice cream bars) rises, and Greg increases his consumption of Big Macs. This is the result of:

1. The income effect

2. The substitution effect

Both 1 and 2

Don’t know

Question 11

The face value of what we have in our pocket or bank account is referred to:

Inflation-adjusted income

Nominal income

Real income

Don’t know

Question 12

If an increase in price results in a relatively large decrease in the quantity demanded, the price elasticity of demand is said to be:

Elastic

Inelastic

Unit elastic

Don’t know

Question 13

To solve the unit of measure problem, the price elasticity of demand is measured in:

Absolute amounts

Percentages

Uniform units

Don’t know

Question 14

Demand price elasticities are usually stated as:

Absolute value numbers

Fractions

Negative members

Don’t know

Question 15

The greater the number of substitutes for a good:

The less elastic its demand will be

The more elastic its demand will be

This has no effect on price elasticity

Don’t know

Question 16

The broader the definition of a product, e.g., gas versus Chevron gas:

The less elastic its demand will be

The more elastic its demand will be.

This has no effect on price elasticity

Don’t know

Question 17

The higher the price of a good relative to your budget:

The greater will be your elasticity of demand for it.

The lesser will be your elasticity of demand for it.

This has no effect on your elasticity of demand

Don’t know

Question 18

The longer the time horizon for a product:

The less elastic its demand will be

The more elastic its demand will be

This has no effect on price elasticity

Don’t know

Question 19

Total revenue equals:

Profits

Price divided by quantity

Price times quantity

Don’t know

Question 20

Suppose your business sells nano-widgets, and I tell you that demand for your product is relatively price elastic. What would you do to raise your total revenues?

Lower the price

Raise the price

Need more information

Don’t know

Question 21

Why do you think that many airlines offer fare discounts to people who stay over on a Saturday night?

Business people who want to fly home on weekends have a higher price elasticity than weekend pleasure travelers

Business people who want to fly home on weekends have a lower price elasticity than weekend pleasure travelers

Weekend pleasure travelers have a lower price elasticity

Don’t know

Question 22

Why don’t most new cars sell at their sticker price and instead require buyers to negotiate?

The industry pricing strategy is to sort out “comparison shoppers” with more elastic demands from “impulse buyers” who have inelastic demands and charge impulse buyers more

The industry pricing strategy is to sort out “comparison shoppers” with more inelastic demands from “impulse buyers” who have more elastic demands and charge impulse buyers more

Cars are more complicated purchases

Don’t know

Question 23

One of the unintended consequences of a “war on drugs” that restricts supply and drives up prices is an increase in crime. Because of this unintended consequence, some people have advocated legalizing drugs. Would this lead to an increase in drug use, assuming legalization also led to a decrease in drug prices?

Yes, if the casual drug user worried about breaking the law has a more elastic demand for drugs than the serious drug addict.

Yes, if the casual drug user worried about breaking the law has a more inelastic demand for drugs than the serious drug addict.

No, if the casual drug user worried about breaking the law has a more elastic demand than the serious drug addict.

Don’t know

Question 24

During years of bumper crops when food prices fall substantially, many farmers often go bankrupt. This is because:

Demand is highly elastic

Demand is highly inelastic

Demand is unit elastic

Don’t know

Question 25

Why do governments prefer to tax products like alcohol or tobacco?

Demand is highly elastic

Demand is highly inelastic

Demand is unit elastic

Don’t know

............DEMAND...........

Question 1

The Law Of Demand states that:

1. The lower the price, ceteris paribus, the more units a consumer will demand.

2. The higher the price, ceteris paribus, the less the consumer will demand.

Both 1 and 2

Don’t know

Question 2

When the price of chicken rises, people will tend to eat more beef. This is an example of:

The Income Effect

The Substitution Effect

Both

Don’t know

Question 3

Why does quantity demanded tend to fall as price rises?

The Substitution Effect

The Income Effect

Both 1 and 2

Don’t know

Question 4

Ceteris Paribus is a Latin phrase meaning:

Following prices in the market

Holding other things constant

Matching pairs of goods

Don’t know

Question 5

The assumption of ceteris paribus is useful because it allows economists to draw their graphs in:

Two dimensions

Three dimensions

Both 1 and 2

Don’t know

Question 6

Common shift factors used in the analysis of demand include:

1. Income and tastes

2. The prices of other products

Both 1 and 2

Don’t know

Question 7

Suppose the price of chicken rises. Which way do you think the beef demand curve will shift?

Inward and leftward

Outward and rightward

It won’t shift

Don’t know

Question 8

If the demand of one product like corn flakes rises when the demand for another product like oatmeal rises, oatmeal and corn flakes are:

Complements

Substitutes

Elastic goods

Don’t know

Question 9

Which statement is true?

1. A shift in the demand curve represents a change in demand

2. A movement along the demand curve represents a change in the quantity demanded

Both 1 and 2

Don’t know

Question 10

The Law Of Supply states that:

1. The lower the price, ceteris paribus, the less units firms will produce.

2. The higher the price, ceteris paribus, the more the consumer will demand.

Both 1 and 2

Don’t know

Question 11

The Law of Supply implies that the supply curve:

Slopes downward

Slopes upward

Is usually vertical

Don’t know

Question 12

Which of these is NOT an important shift factor for the supply curve:

Tastes

The prices of labor and raw materials

Technology

Don’t know

Question 13

A set of regulations imposed upon a manufacturer to clean up air and water pollution is likely to:

Shift the supply curve inward and leftward and decrease prices

Shift the supply curve outward and rightward and increase prices

Shift the supply curve inward and leftward and increase prices

Don’t know

Question 14

To say something is in equilibrium in economics is to say that:

1. The dynamic forces pushing on it cancel each other out.

2. The upward pressure on price is exactly offset by the downward pressure on price.

Both 1 and 2

Don’t know

Question 15

Suppose you go to the store and see that the price of bread has doubled. Has the demand for bread risen or has bread become more expensive to produce?

Demand for has risen

Bread had become more expensive to produce

Need more information to determine why the price doubled

Don’t know

Question 16

In the 1930s, United States President Franklin Delano Roosevelt’s New Deal began a program of price supports for many of America’s agricultural products. This program led to:

Shortages

Surpluses

An economically efficient market equilibrium

Don’t know

Question 17

During the Arab Oil Embargo of 1974, the OPEC cartel put an embargo on oil sales to the United States. The U.S. government responded with a price ceiling. This led to:

1. Gas lines as a form of rationing

2. An efficient market outcome

Both 1 and 2

Don’t know

Question 18

Suppose, you believe that the coming winter is going to be unusually warm and rainy because of an El Nino condition and you are a stock market investor. What actions might you take?

1. Sell your heating oil stocks

2. Buy companies that provide things like pest control and allergy medicines.

Both 1 and 2

Don’t know

Question 19

Suppose a drought in Brazil significantly reduces the coffee crop in Brazil? What is likely to happen to the price of coffee and Starbucks and what is likely to happen to the profits for the Starbucks company?

Prices rise because of an increase in costs and profits rise because of an increase in the quantity demanded.

Prices rise because of an increase in costs and profits fall because of a decrease in the quantity demanded.

No effect on prices or profits

Don’t know