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Chapters 16 and 17 Questions For Review

This document contains review questions for chapters 16 and 17 of an economics textbook. Chapter 16 covers concepts related to utility maximization including diminishing marginal utility and setting marginal utilities equal between goods. Chapter 17 covers behavioral economics topics like the ultimatum game, status quo bias, and mistakes in intertemporal decision making.

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Alireza Kafaei
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57 views2 pages

Chapters 16 and 17 Questions For Review

This document contains review questions for chapters 16 and 17 of an economics textbook. Chapter 16 covers concepts related to utility maximization including diminishing marginal utility and setting marginal utilities equal between goods. Chapter 17 covers behavioral economics topics like the ultimatum game, status quo bias, and mistakes in intertemporal decision making.

Uploaded by

Alireza Kafaei
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chapters 16-17 Questions for Review

Chapter 16

1. Fill in the missing information in the table below:

Number of Total utility Marginal Number of Total utility Marginal


cookies of cookies utility of pretzels of pretzels utility of
cookies pretzels
0 0 0 0
1 15 1 12
2 40 2 20
3 60 3 26
4 75 4 30
5 65 5 28
6 50 6 20

When does this consumer experience diminishing marginal utility for cookies? For
pretzels?

2. The way to maximise utility is to set the per-dollar marginal utility of each good equal
to each other. True/false? Explain your answer.

3. Watch this clip from the documentary: “Super Size Me”.

You will find it in the block.

A) How does eating at McDonalds contrast with fine dining? Hint: think marginal v
total utility.

B) How does eating at McDonalds illustrate the diamond-water paradox?

4. Please read this article: “How Uber drivers decide how long to work” (NY Times, 16
September 2016).

You will find it in the block.

Economists love Uber for a variety of reasons, and this article highlights one of those
reasons. With Uber’s granular date, researchers were able to answer an age-old
question: when do drivers decide to quit working each day? Do they have a daily
income goal, or do they drive more when fares are high and less when fares are low?

A) What is the rationale of the drivers underpinning the results found by Mr Sheldon?

B) What do the results suggest about the dominant strategy of those in the gig economy?

1
Chapter 17

1. Cilus and Roseanne are playing an ultimatum game where Cilus is given $50 and
asked to propose a way of splitting it with Roseanne. When Roseanne learns Cilus’s
proposal, she chooses whether to accept or reject the split. If Roseanne accepts the split,
both players receive the money according to Cilus’s split proposal. If Roseanne rejects
the split, both players receive nothing. This game will be played only once, so Cilus does
not have to worry about reciprocity when making his choice. Assume that split
proposals can be made only in increments of $1.

According to traditional economic theory, which presumes that both players are fully
rational and wish to maximise their incomes, what is the outcome of the game? Why is
this outcome not observed very often in experimental settings?

2. Describe three characteristics of status quo bias.

3. Describe the attributes of intertemporal decision-making and three examples of


mistakes in intertemporal decision-making.

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