Question 1

Because of framing effects, a worker will be happy with a 5 percent raise regardless of how much of a raise her fellow employees receive.

Accepted Answer

A) True 
 B)False

Question 2

Behavioral economics attempts to make better predictions about human behavior by combining insights from the following fields, except

Accepted Answer

A)  economics.
B)  biology.
C)  physics.
D)  psychology.

Question 3

Which of the following individuals least likely suffers from myopia?

Accepted Answer

A)  Marilyn, who struggles to lose weight because she regularly cheats on her diet.
B)  Myrna, who lived through the Great Depression and tends to spend frugally and save most of her money.
C)  Malcolm, who currently spends all his income and saves nothing for retirement.
D)  Marvin, who regularly sleeps in and is constantly late for work, much to the chagrin of his boss.

Question 4

The "hedonic treadmill" of prospect theory suggests that if people's incomes rise and stay at the new higher level, then their feelings of satisfaction also rise and stay at the new higher level.

Accepted Answer

A) True 
 B)False

Question 5

According to behavioral economists, someone suffering from myopia is most likely to

Accepted Answer

A)  spend too little on present consumption and save more than is necessary for the future.
B)  vote only for economic policies that serve his or her short- and long-term interests.
C)  rely too much on System 2 of the brain.
D)  spend too much on present consumption and not save enough for the future.

Question 6

The tendency of people to discount long-term values more than they do near-term values-making many people "future blind"- is known in behavioral economics as

Accepted Answer

A)  myopia.
B)  anchoring.
C)  framing effects.
D)  time Inconsistency.

Question 7

Josh will receive a salar y of $300,000 next year.According to prospect theory,

Accepted Answer

A)  Josh will be happy with that amount regardless of what he has made in the past.
B)  Josh will only be happy with that salary if everyone else around him makes less than he does.
C)  Josh will only be happy with that salary if his cost of living has not increased.
D)  Josh's satisfaction with that salar y depends on how much he made in the past.

Question 8

Behavioral economics hopes to eventually fully replace the neoclassical economic model.

Accepted Answer

A) True 
 B)False

Question 9

Heuristics generally help people make fewer errors in their decisions.

Accepted Answer

A) True 
 B)False

Question 10

Behavioral economics recognizes that people frequently make errors, but these errors generally cancel out in such a way that neoclassical models are sufficient for predicting economic outcomes.

Accepted Answer

A) True 
 B)False

Question 11

Credit card companies put a low "minimum required payment" on people's bills in the hope that people will send in low payments, thereby allowing the card companies to earn more interest.The companies are trying to exploit the

Accepted Answer

A)  framing effect.
B)  anchoring effect.
C)  confirmation bias.
D)  endowment effect.

Question 12

The availability heuristic refers to people purchasing what is most easily accessible.

Accepted Answer

A) True 
 B)False

Question 13

When students end up doing "all-nighters" just to finish a term paper, it illustrates the

Accepted Answer

A)  planning fallacy.
B)  framing effect.
C)  hindsight bias.
D)  availability heuristic.

Question 14

Myopia means

Accepted Answer

A)  far-sightedness.
B)  a tendency to focus on the future.
C)  a higher concern for the present.
D)  price sensitivity.

Question 15

Economist John List has shown that the so-called endowment effect tends to be lower among people who often

Accepted Answer

A)  buy things for resale.
B)  buy things for personal long-term use.
C)  produce things for themselves.
D)  value their possessions.

Question 16

"Impulse buying" is often the result of a

Accepted Answer

A)  rational optimizing decision in response to incentives and prices.
B)  precise estimation of one's marginal utilities and price comparisons.
C)  systematic nonrational behavior that marketers can take advantage of.
D)  random error in a consumer's behavior that is not predictable.

Question 17

Behavioral economists avoid dealing with fairness concerns because the concept is too subjective.

Accepted Answer

A) True 
 B)False

Question 18

When people often blame an "act of nature" or their colleagues for their plans going awry, they are illustrating the cognitive bias known as the overconfidence effect.

Accepted Answer

A) True 
 B)False

Question 19

Neoclassical economics does not hold which of the following assumptions?

Accepted Answer

A)  People are fundamentally rational.
B)  People can make errors initially, but they learn quickly.
C)  People's errors are random and rare.
D)  People make regularly repeated mistakes.

Question 20

Which of the following questions best illustrates the "framing effects" studied by behavioral economists?

Accepted Answer

A)  Which would you rather have after lunch today, an apple or an orange?
B)  How much would you rather receive: $100 while everyone else gets $110, or $80 like everyone else?
C)  Where would you rather invest your funds, in stocks or gold certificates?
D)  What would you rather do: go to college and postpone having a full-time job, or forgo college and get a full-time job now?

Exam 8: Behavioral Economics

When students end up doing "all-nighters" just to finish a term paper, it illustrates the

Correct AnswerverifiedShow Answer

Heuristics generally help people make fewer errors in their decisions.

Correct AnswerverifiedShow Answer

When people often blame an "act of nature" or their colleagues for their plans going awry, they are illustrating the cognitive bias known as the overconfidence effect.

Correct AnswerverifiedShow Answer

Which of the following questions best illustrates the "framing effects" studied by behavioral economists?

Correct AnswerverifiedShow Answer

Behavioral economics attempts to make better predictions about human behavior by combining insights from the following fields, except

Correct AnswerverifiedShow Answer

Because of framing effects, a worker will be happy with a 5 percent raise regardless of how much of a raise her fellow employees receive.

Correct AnswerverifiedShow Answer

Neoclassical economics does not hold which of the following assumptions?

Correct AnswerverifiedShow Answer

Behavioral economics hopes to eventually fully replace the neoclassical economic model.

Correct AnswerverifiedShow Answer

Credit card companies put a low "minimum required payment" on people's bills in the hope that people will send in low payments, thereby allowing the card companies to earn more interest.The companies are trying to exploit the

Correct AnswerverifiedShow Answer

According to behavioral economists, someone suffering from myopia is most likely to

Correct AnswerverifiedShow Answer

Behavioral economists avoid dealing with fairness concerns because the concept is too subjective.

Correct AnswerverifiedShow Answer

The tendency of people to discount long-term values more than they do near-term values-making many people "future blind"- is known in behavioral economics as

Correct AnswerverifiedShow Answer

Behavioral economics recognizes that people frequently make errors, but these errors generally cancel out in such a way that neoclassical models are sufficient for predicting economic outcomes.

Correct AnswerverifiedShow Answer

Myopia means

Correct AnswerverifiedShow Answer

The "hedonic treadmill" of prospect theory suggests that if people's incomes rise and stay at the new higher level, then their feelings of satisfaction also rise and stay at the new higher level.

Correct AnswerverifiedShow Answer

Economist John List has shown that the so-called endowment effect tends to be lower among people who often

Correct AnswerverifiedShow Answer

Josh will receive a salar y of $300,000 next year.According to prospect theory,

Correct AnswerverifiedShow Answer

The availability heuristic refers to people purchasing what is most easily accessible.

Correct AnswerverifiedShow Answer

"Impulse buying" is often the result of a

Correct AnswerverifiedShow Answer

Which of the following individuals least likely suffers from myopia?

Correct AnswerverifiedShow Answer

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