1. One of the ugly stepsisters argues that she, rather than Cinderella, should go to the ball because she will derive more utility from it than Cinderella. An economist would:
a. agree, since the ugly stepsister’s reasoning is sound.
b. want to know how much utility each will receive from attending the ball in order to determine which woman should attend.
c. point out that making interpersonal utility comparisons is not possible.
d. ask how many balls each woman has attended in order to calculate the marginal utility that each would derive from attending, and then decide who should go to the ball.
2. The law of diminishing marginal utility states that:
a. total utility decreases as consumption of a good increases.
b. total utility increases as consumption of a good increases.
c. the increase in total utility from consuming an additional unit decreases as consumption increases.
d. the increase in total utility from consuming an additional unit increases as consumption increasThe law of diminishing marginal utility states that:
3. A university cafeteria changes from offering all-you-can-eat meals for one low price to selling each food item separately. After this change, one would expect that the marginal utility of the last food item consumed in the cafeteria by the typical student would:
a. decrease since less food is now likely to be consumed by students who eat a meal in the cafeteria.
b. increase since less food is now likely to be consumed by students who eat a meal in the cafeteria.
c. not change since the same quantity of food is now likely to be consumed at each meal.
d. decrease since more food is now likely to be consumed by students who eat a meal in the cafeteria.
4. Economic analysis that focuses on bounded rationality and psychological insights is known as:
a. behavioral economics.
b. Keynesian economics.
c. Austrian economics.
d. supply-side economics.
5. Which of the following is an example of a concept from behavioral economics?
a. compartmentalizing
b. the endowment effect
c. behavior based on perceived fairness
d. all of the above
6. Which of the following is an example a lack of self-control that contradicts the conclusions of standard economic analysis?
a. Eating more food at an all-you-can-eat buffet
b. Playing video games all night even with an exam the following morning that will determine your semester grade
c. Decreasing the purchase of steak if the price increases 25%
d. all of the above
7. When people alter their preferences when a choice is presented in a certain way, it is called:
a. anchoring
b. framing
c. the endowment effect
d. compartmentalizing
8. The idea that when we own something we value it more than other people do is called:
a. self control
b. anchoring
c. compartmentalizing
d. the endowment effect
9. If you win money in a casino you may be more likely to spend that money than your hard-earned cash. This is called:
a. compartmentalizing
b. self control
c. rule of thumb
d. anchoring
10. The term used to describe a more realistic conception of human problem-solving that assumes less than perfect analysis is:
a. framing.
b. compartmentalizing.
c. countercyclical policy.
d. bounded rationality.
