FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 2: Transaction Utility and Consumer Pricing

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

The sunk cost fallacy occurs when:

A) Losses hurt more than gains.
B) Gains or losses are compared to some reference point.
C) My utility function contains a bliss point.
D) I attempt to recover past costs by continuing an activity when there is a negative return.

Correct Answer

verified

Show Answer

Question 22

True/False

Review LaterAdd Note

Review Later

Transaction Utility describes the scenario in which a consumer spends too much on a good.

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

"When an individual uses a comparison to aid in making a decision, we often call this a:

Firm $\mathrm{A}$ and Firm B produce a good called $\mathrm{x}$ and both firms have a production function given by $(x)=\sqrt{x}$ . It costs each firm $\$ 0.25$ to produce each unit of $\mathrm{x}$ and both firms sell a unit of $\mathrm{x}$ for $\$ 2$ . However, to purchase the equipment needed to produce $x$ , Firm A spent $\$ 2500$ and Firm B spent $\$ 1500$ . The equipment each firm purchased is identical. How many units of $x$ should each firm produce?

An individual who is risk-neutral is willing to pay a flat-rate to avoid the uncertainty of a linear-pricing plan.

Consider the following utility function, where $\mathrm{x}$ is the consumer good and $\mathrm{p}$ is the price of $\mathrm{x}$ . $U(x, p) =\sqrt{x}+(p-10)$ is an example of utility function for an individual who exhibits which type of transaction utility?

I have been saving my money to buy a new car. I know that I want to buy a Prius and that it will cost about $\$ 22,000$ . My refrigerator has been malfunctioning too, so any left over money will go towards repairs. My utility function can be written as $U(x, p, \varepsilon) =x+z(p, \varepsilon)$ , where $\mathrm{x}=1$ if $\mathrm{I}$ buy the Prius and 0 otherwise, $\mathrm{p}$ is the price of the Prius and $\varepsilon$ is my reference point. Which of the following functions for $z(p, \varepsilon)$ best describes the scenario above?

Payment decoupling is best described as:

Acquisition utility refers to the utility I receive from consuming a good and transaction utility is the utility I derive from feeling like I got a good deal.

There are two local bars and I always buy the same beer at both bars. At the first bar, the music is bad and the bartender is rude. At the second bar, the music is wonderful, there are lots of friendly people, and I always enjoy myself more than when I go to the first bar. An example of context adding value to a good is:

Which of the following is not a procedural explanation for the flat rate bias?