Question :
31) Harvey Miller owns a baseball that was hit for : 1387717
31) Harvey Miller owns a baseball that was hit for a home run by Ted Williams. Harvey, a long-time Boston Red Sox fan, recently refused to sell his baseball for $75,000 even though he would not have paid someone more than $10,000 for the baseball if he did not already own it. Harvey explained his decision not to sell the baseball by noting that: “Ted Williams was my hero. This baseball has a great deal of sentimental value for me.” Which of the following can explain Harvey’s behavior?
A) the difference between implicit and explicit costs
B) the scarcity of home run baseballs hit by Ted Williams
C) the endowment effect
D) how social influences can affect consumption choices
32) Arnold Kim began blogging about Apple products during his fourth year of medical school. Kim’s website, MacRumors.com, became so successful that he decided to give up his medical career and work full time on his website, despite the nearly $200,000 he had invested in his education. In making his decision, the $200,000 he spent on his education
A) should be ignored since it represents a sunk cost.
B) should be considered since it is money he has spent and needs to recoup.
C) should be ignored only if Kim can earn more than $200,000 by running his website.
D) should be considered since it is money he could have used to invest in his website.
33) Health Clubs typically experience an increase in one-year memberships in January, but many new customers cancel their memberships before the end of the year. Which of the following is the best explanation for this behavior?
A) Some health club members suffer minor injuries that prevent them from working out.
B) Some people are overly optimistic about their future behavior.
C) Some people fail to treat their membership fees as sunk costs.
D) Some members receive utility from activities they believe are popular.
34) Under J.C. Penney’s everyday low pricing policy, the everyday low prices
A) ended up being the highest prices ever charged by the company.
B) were always lower than the sale prices under the previous policy.
C) were not actually charged every day, but only once a month during half-off sales.
D) ended up being higher than the sale prices under the previous pricing policy.
35) Wilbur Rickhiser, a financial advisor, recently told one of his clients: “The biggest mistake you can make is to hold onto a stock for too long in order to avoid a loss. Let’s say you bought a stock for $50 per share but that six months later the price fell to $40 after a poor earnings report. Many of my clients in this situation will hold the stock, hoping the price will later rise above $50. In most cases like this the price does not rise and may even fall. You must know when to cut your losses.” Which of the following is the best explanation for Rickhiser’s advice?
A) People sometimes buy stocks because other people are buying them or they want to appear to be fashionable.
B) People sometimes make mistakes when they buy stocks because of the endowment effect.
C) People sometimes make mistakes when they buy stocks or when they buy goods and services: they ignore the monetary opportunity costs of their choices.
D) People often fail to ignore the sunk costs of their decisions. The cost of the stock bought at $50 per share is a sunk cost.
36) Suppose Adam Einberg pays $100 for a ticket to a new Broadway play and $100 was the maximum price he was willing to pay. On the day of the performance of the play Adam refuses to sell the ticket for $150. How would behavioral economists explain Adam’s refusal to sell his ticket?
A) Adam’s tastes had changed from the time he bought the ticket to the time of the performance of the play.
B) When Adam bought the ticket he was being unrealistic about his future behavior.
C) The endowment effect explains Adam’s actions. People like Adam seem to value things that they have more than the things they do not have.
D) Adam’s income probably increased between the time he bought the ticket and the day of the play’s performance.
37) Assume that you had a ticket for a basketball playoff game that you bought for $50, the maximum price you were willing to pay. If a friend of yours offers to buy the ticket for $100 but you decide not to sell it, how can your decision be explained?
A) You expect to receive greater utility from attending the playoff game than you received from buying the ticket.
B) by the endowment effect
C) by the law of diminishing marginal utility
D) The income effect from the increase in the price of the ticket from $50 to $100 was greater than the substitution effect.
38) A common mistake made by consumers is the failure to take into account the sunk costs of their actions.
39) The endowment effect is the tendency of people to be unwilling to sell a good they already own even if they are offered a price greater than they would be willing to pay to buy the good if they did not already own it.
40) Behavioral economics is the study of situations in which people make rational choices.
