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

Question 1

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

Jeremy Bentham

Stanley Jevons

Adam Smith

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Question 2

Who is the father of Utility Theory?

Jeremy Bentham

Stanley Jevons

Adam Smith

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Question 3

Consumer theory is based on a theory of:

Income redistribution

Self-interest

The public interest

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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

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Question 5

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

Cardinal

Ordinal

Subliminal

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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

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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

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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

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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

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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

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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

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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

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Question 13

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

Absolute amounts

Percentages

Uniform units

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Question 14

Demand price elasticities are usually stated as:

Absolute value numbers

Fractions

Negative members

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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

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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

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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

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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

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Question 19

Total revenue equals:

Profits

Price divided by quantity

Price times quantity

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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

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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

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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

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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.

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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

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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

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