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24 Dec 2018

a. Lauren is at the grocery store, where there is a sale on cereal. Cereal is only $1 per box, but next week it will be $2 per box. Lauren has $20 to spend on cereal in this two-week period. Show her cereal budget constraint and predict the point on the budget constraint that she’ll select.

b. Lauren is at the grocery store, where there is a sale on bananas. Bananas are only 25 cents per pound, but next week they will be 50 cents per pound. Lauren has $1 to spend on bananas in this two-week period. Show her banana budget constraint and predict the point on the budget constraint that she’ll select. Explain why this is likely to differ from the point that she selected on her cereal budget constraint.

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Lelia Lubowitz
Lelia LubowitzLv2
25 Dec 2018

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Related questions

1.) Suppose that Joe enjoys and repeatedly does stupid things like getting heavily into debt and insulting police officers. Do these actions constitute systematic errors? If he gets what he wants each time, are his stupid actions even considered to be errors by economists? Explain.

2.) Why do behavioral economists consider it helpful to base a theory of economic behavior on the actual mental processes that people use to make decisions? Why do neoclassical economists not care about whether a theory incorporates those actual mental processes?

10.) What does behavioral economics have to say about each of the following statements?

a.) "Nobody is truly charitable--they just give money to show off."

b.) "America has a ruthless capitalist system. Considerations of fairness are totally ignored."

c.) "Selfish people always get ahead. It's like nobody even notices!"

__________________________________________________________________

1.) One type of systematic error arises because people tend to think of benefits in percentage terms rather than in absolute dollar amounts. As an example, Samir is willing to drive 20 minutes out of his way to save $4 on a grocery item that costs $10 at a local market. But he is unwilling to drive 20 minutes out of his way to save $10 on a laptop that costs $400 at a local store. In percentage terms, how big is the saving on the grocery item? On the laptop? In absolute terms, how big is the savings on the grocery item? On the laptop? If Samir is willing to sacrifice 20 minutes of his time to save $4 in one case, shouldn't he also be willing to sacrifice 20 minutes of his time to save $10?

4.) Angela owes $500 on a credit card and $2,000 on a student loan. The credit card has a 15 percent annual interest rate and the student loan has a 7 percent annual interest rate. Her sense of loss aversion makes her more anxious about the larger loan. As a result, she plans to pay it off first--depsite the fact that professional financial advisors always tell people to pay off their highest-interest-rate loans first. Suppose Angela has only $500 at the present time to help pay down her loans and that this $500 will be the only money she will have for making debt payments for at least the next year. If she uses the $500 to pay off the credit card, how much interest will accrue on the other loan over the coming year? On the other hand, if she uses the $500 to pay off part of the student loan, how much in combined interest will she owe over the next year on the remaining balances on the two loans? By how many dollars will she be better off if she uses the $500 to completely pay off the credit card rather than partly paying down the student loan? (HInt: If you owe X dollars at an annual interest rate of Y percent, your annual interest payment will be X * Y, where the interest rate Y is expressed as a decimal.)

Michael spends all of his income on coffee and donuts. A coffee costs $2.50 and a donut costs $2.00. At his current consumption level, the marginal utility for coffee is 30 utils, and the marginal utility for a donut is 60 utils. Which statement best describes what Michael needs to do to maximize his utility?

Question 1 options:

1)

buy less of both coffee and donuts.

2)

buy less coffee and more donuts.

3)

buy more coffee and less donuts.

4)

spend the same amount on coffee as he does on donuts.

Question 2

What is it called when the marginal utility derived from the last dollar spent on each good is the same across all goods and the last dollar spent uses all of the available budget for the purchase of those goods?

Question 2 options:

1)

the optimal consumption bundle.

2)

the optimal production bundle.

3)

diminishing marginal utility.

4)

optimal point.

Question 3 (1 point)

What does the economic theory of marginal utility infer?

Question 3 options:

1)

consumers naturally know which consumption choices will maximize their utility.

2)

consumers who watch market trends are better at maximizing their utility than are those who do not watch those trends.

3)

one cannot maximize utility without taking an economics class that explains utility theory.

4)

one cannot maximize utility without doing the math of calculating the ratios of marginal utility divided by price.

Question 4

Kate is addicted to chocolate and does not care how much it costs. In fact, she spends more than $20 a week on chocolate. What can be concluded about elasticity in her buying decisions?

Question 4 options:

1)

Her income elasticity of demand for chocolate is equal to one.

2)

Her income elasticity of demand for chocolate is equal to zero.

3)

Her price elasticity of demand for chocolate is equal to one.

4)

Her price elasticity of demand for chocolate is equal to zero.

Save

Question 5 (1 point)

Why does the demand for a good become relatively more elastic?

Question 5 options:

1)

substitutes for the good become more available.

2)

substitutes for the good become less available.

3)

the good becomes more of a necessity.

4)

the time allowed for adjustment is shortened.

Save

Question 6 (1 point)

Assume the price of chicken per pound is $3.49 and that Americans purchase 10 million pounds per chicken every month. If the price of chicken increases to $5.49 per pound, identify what will occur to consumer surplus?

Question 6 options:

1)

consumer surplus increases.

2)

consumer surplus decreases.

3)

consumer surplus creates incentive to save.

4)

consumer surplus creates incentive to spend.

Question 7 (1 point)

What is another name for the difference between the price that consumers are willing to pay for a good and a lower price that they may actually have to pay?

Question 7 options:

1)

profit.

2)

revenue.

3)

consumer utility.

4)

consumer surplus.

Question 8

Adam, Brian, Robert, and Sam all want to attend a football game. The admission price is $48. Adam is willing to pay $59 for the ticket. Brian is willing to pay $39. Robert is willing to pay $45, and Sam is willing to pay $55. Based on this information, who will go to the game?

Question 8 options:

1)

Adam, Brian, Robert, and Sam.

2)

Brian and Robert.

3)

Adam and Sam.

4)

Brian, Robert, and Sam.

Save

Question 9 (1 point)

Lily is willing to pay $10 for one bracelet and $5 for a second. Patty is willing to pay $12 for one bracelet and $2 for a second. If the price is currently $8 per bracelet, identify what is the total consumer surplus after Lily and Patty make their purchases?

Question 9 options:

1)

$8

2)

$6

3)

$7

4)

$5

Question 10 (1 point)

Manfred is willing to shovel one driveway for $25, a second for $30, and a third for $35. Assume that the market rate for shoveling driveways is $32. How many driveways will Manfred shovel, what will be his total revenue, and what will be his producer surplus?

Question 10 options:

1)

Manfred will shovel two driveways for a total revenue of $64 and his producer surplus will be $9.

2)

Manfred will shovel three driveways for a total revenue of $75 and his producer surplus will be $12.

3)

Manfred will shovel three driveways for a total revenue of $96 and his producer surplus will be $5.

4)

Manfred will shovel four driveways for a total revenue of $125 and his producer surplus will be $18.

Save

Question 11 (1 point)

What would the difference between the price that producers receive and the lower price at which they are willing to sell the good be called?

Question 11 options:

1)

producer shortage.

2)

producer surplus.

3)

consumer shortage.

4)

consumer surplus.

Save

Question 12 (1 point)

What will happen when there is an increase in the price of eBook downloads?

Question 12 options:

1)

It reduces the marginal utility derived from each dollar spent on eBooks.

2)

It reduces the marginal utility derived from each hardcopy book purchased.

3)

There will not be a substitution effect.

4)

There will not be a change in the number of eBooks in the set of consumption possibilities.

Save

Question 13 (1 point)

When is price elasticity of demand utilized to measure how an individual changes the quantity they demand?

Question 13 options:

1)

when supply changes.

2)

when product quality changes.

3)

when marketing changes.

4)

when price changes.

Save

Question 14 (1 point)

Assume Mary consumes only tea and pastries. A cup of tea costs 5 euros and a pastry costs 8 euros. Her weekly income is 450 euros. Mary always drinks 2 cups of tea for every pastry she consumes. What is Mary’s optimal weekly consumption bundle?

Question 14 options:

1)

25 cups of tea and 50 pastries.

2)

50 cups of tea and 25 pastries.

3)

58 cups of tea and 20 pastries.

4)

60 cups of tea and 30 pastries.

Save

Question 15 (1 point)

When is producer surplus a positive value?

Question 15 options:

1)

the price the producer is willing to charge equals the market price.

2)

there is no tax applied to the good.

3)

the price the producer is willing to charge is less than the market price.

4)

the price the producer is willing to charge is greater than the market price.

1. Marketing traditionally has been divided into a set of fourinterrelated decisions known as the marketing mix, or four Ps,including all of the following EXCEPT:
A. product
B. place
C. performance
D. promotion
E. price

2. Marketers want their firms to develop efficient operationsbecause this kind of efficiency:
A. usually leads to lower prices or greater pricingflexibility.
B. allows the firm to offer greater value to customers.
C. makes it easier to get the products customers want to them whenthey want them.
D. can lead to more attractive margins.
E. All of these

3. The Ethical Decision-Making Framework includes all of thefollowing steps EXCEPT:
A. identify issues.
B. promote the firm's corporate social responsibilityefforts.
C. gather information and identify stakeholders.
D. brainstorm and evaluate alternatives.
E. choose a course of action.

4. The centerpiece of the Marketing Environment Analysis Frameworkis:
A. green marketing.
B. corporate partners.
C. culture.
D. competitive intelligence.
E. consumers.

5. Most "big box" retailers regularly move products from one aisleto another. They also put personal care products in the pharmacyarea, many aisles away from the grocery products. They do thisbecause consumers who spend more time walking through the store arelikely to make:
A. impulse purchases.
B. limited problem solving decisions.
C. extended problem solving decisions.
D. ritual consumption purchases.
E. affective alternative decisions.

6. Edward, the leading salesperson for Harry's Honda dealership,began hearing customers asking for hybrid automobiles several yearsago. Edward alerted Harry, and Harry pre-ordered many Honda hybridsbefore they became available. In this case, the source of needrecognition was:
A. trade show demonstrations.
B. ads in trade journals.
C. customers.
D. the Internet.
E. suppliers.

7. One of the reasons marketers use loyalty segmentation is:
A. the high cost of finding new customers.
B. government tax incentives for loyalty.
C. accounting difficulties associated with identifying newcustomers.
D. rapid population increases.
E. the failure of micromarketing as a workable strategy.

8. Matt was passionate about Abercrombie & Fitch. It was theonly place he'd buy his clothes. If anyone asked him about clothes,he would talk for what seemed like hours about why he only shoppedthere. From a strictly marketing perspective, this word of mouth ispart of:
A. social insistence.
B. brand loyalty.
C. self-actualization.
D. motivation.
E. brand extension.

9. When Procter & Gamble added teeth whitening products underthe Crest brand, the firm was engaged in:
A. corporate branding.
B. brand extension.
C. brand licensing.
D. brand association.
E. perceived value branding.

10. By the time BMW and Mercedes Benz entered the mini-SUV market,there were many competitors, sales had peaked, and profits weredeclining. These firms entered the market during the ______________stage of the product life cycle.
A. introduction
B. leveling
C. maturity
D. growth
E. decline

11. By providing good customer service, firms __________ theirproducts or services.
A. eliminate the communication gap for
B. add value to
C. reduce the zone of tolerance for
D. reduce the empowerment cost associated with
E. increase the perishability of

12. Collecting information at the point of sale is astraightforward and inexpensive way to assess service quality, butthis approach will NOT be useful if:
A. customers cannot assess service quality, as in the case of oilchange or maintenance check.
B. decision-making managers do not get the results of thefeedback.
C. the person who rendered poor service is the same personcollecting the information.
D. customers are rushed and don't take the time to assess theservice.
E. All of these.

13. Ryan gave the manager of his convenience store a set ofbinoculars so she could see the gasoline prices charged by theother convenience store at that intersection. Ryan told the managerto always match the gasoline prices of the other store. Ryan isusing a _____________________ pricing strategy.
A. maximizing profits
B. target profit
C. target return
D. status quo
E. sales

14. At the break-even point:
A. costs are zero.
B. price is maximized.
C. profits are zero.
D. fixed costs are zero.
E. contribution per unit is zero.

15. For marketers to advertise a price as their ______________, theBetter Business Bureau recommends that at least 50 percent of thesales of a product occur at that price.
A. fixed price
B. zone price
C. regular price
D. leader price
E. cost-based price

16. Brenda is working on an automated re-ordering system which willelectronically re-order inventory for her shoe store as purchasesare made. Brenda is working on a supply chain management systemthat will:
A. provide products at the right time.
B. provide products at the right locations.
C. provide the right quantities.
D. minimize system-wide costs.
E. all of these.

17. A manufacturer of high-end products might consider sellingproducts in a warehouse club if:
A. there are no high-end shopping centers within a 100-mile radiusof the warehouse club.
B. the warehouse club has a good reputation.
C. the manufacturer is trying to increase market share.
D. the manufacturer overestimated demand or has a great deal ofreturned merchandise from other retailers.
E. the warehouse club wants to upgrade its image.

18. Because of the way _______________ buy merchandise, customerscan never be confident that the same merchandise will be in stockeach time they visit the store.
A. department stores
B. off-price retailers
C. discount stores
D. downstream value stores
E. category specialist stores

19. The basic goal of integrated marketing communications isto:
A. communicate the value proposition to the target market.
B. create desire.
C. manipulate consumers.
D. outspend competitors.
E. tell the world about your company.

20. The sender of an integrated marketing communication:
A. must work with the advertising specialists to ensure allrecipients interpret the message accurately.
B. can assess the manner in which receivers interpret the messagethrough gross rating points.
C. has little control over what meaning any individual receiverwill take from the message.
D. controls the meaning all receivers take from the message.
E. generally uses a rule-of-thumb interpretation index.

21. In the AIDA model:
A. advertising leads to interest, which hopefully leads to desireand then, action.
B. awareness leads to integration, which hopefully leads to desireand then, action.
C. awareness leads to interest, which hopefully leads to desire andthen, action.
D. awareness leads to interest, which hopefully leads to desire andthen, attention.
E. awareness leads to interest, which hopefully leads todetermination and then, action.

22. When Microsoft introduces a new version of its Windowsoperating system, it typically uses selected magazine, Internet,and direct mail advertising. This combination of advertisingoutlets represents Microsoft's:
A. niche buy.
B. advertising plan.
C. media mix.
D. track testing.
E. supply chain messaging.

23. _____________ advertising has the advantages of being highlytargeted and offering opportunities for personalization.
A. Television
B. Radio
C. Direct mail
D. Outdoor
E. Newspaper

24. In the United States, the regulation of advertising involves acomplex mix of laws and informal restrictions designed to:
A. protect consumers from deceptive practices.
B. stimulate domestic demand.
C. reduce international competition.
D. promote social marketing.
E. institutionalize pull strategies.

25. _________________ is a sales philosophy and process thatemphasizes a commitment to maintaining and investing in long-term,mutually beneficial business relationships.
A. Organizational buying
B. Cold calling
C. Psychographic selling
D. Relationship selling
E. Sales management

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