Question 1

Specialty shops can charge and get customers to pay higher prices for identical goods than they would pay in "big box" stores.Assuming that these differences are driven by store appearance rather than differences in services provided,which of the following best explains this phenomenon?

Accepted Answer

A)   Availability heuristics.
B)   Framing effects.
C)   Confirmation biases.
D)   Self-serving biases.

Question 2

Behavioral economics recognizes that people use System 1 to make decisions more often than they use System 2.Which of the following is an implication of that decision-making process?

Accepted Answer

A)   A majority of decisions are not made according to the neoclassical assumption of rational behavior.
B)   Most decisions involve careful calculation of costs and benefits.
C)   Even though most decisions are irrational,the neoclassical model still accurately predicts outcomes.
D)   System 1 is best at making optimal decisions.

Question 3

Susie knows that too many sugary treats,while delicious when eaten,have long-term adverse effects on weight and health.Based on this information,a behavioral economist would expect Susie to:

Accepted Answer

A)   carefully weigh the short-term benefits against the long-term costs and make a rational decision about how many treats to eat.
B)   eat more sugary treats than is optimal,as she likely gives more weight to present events and outcomes than to ones in the future.
C)   give away most of her sugary treats in an effort to resist temptation.
D)   compute the caloric intake and calculate how many hours of exercise would be needed to burn off the calories from each treat.

Question 4

According to behavioral economics,advertising works because it:

Accepted Answer

A)   provides useful information that improves consumers' ability to make decisions.
B)   exploits the self-serving bias.
C)   exploits the recognition heuristic.
D)   quickly communicates price changes that exploit the law of demand.

Question 5

The overconfidence effect exists when people underestimate their chances of being wrong.

Accepted Answer

A) True 
 B)False

Question 6

Prospect theory and the work of behavioral economists confirm that consumers are economically rational.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following individuals received a Nobel Prize in economics for his work in behavioral economics?

Accepted Answer

A)   Daniel Kahneman.
B)   Richard Thaler.
C)   John Wannamaker.
D)   Richard Easterlin.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Internationally,participation differences in organ donation programs are mostly attributed to:

Accepted Answer

A)   cultural views.
B)   financial compensation for organ donors.
C)   what default option is set for participation or nonparticipation.
D)   living standards as measured by per capita GDP.

Question 10

According to behavioral economists,self-control problems generally result from poor information.

Accepted Answer

A) True 
 B)False

Question 11

According to the "endowment effect:"

Accepted Answer

A)   people are willing to pay more for things they don't own than they would have to receive to give up something they already have.
B)   people feel gains and losses with equal intensity.
C)   people assign higher values to things they own than things they don't.
D)   the intensity of feelings from gains and losses depends on how much wealth one possesses.

Question 12

Which of the following statements best reflects behavioral economists' views on self-interest versus the interests of others?

Accepted Answer

A)   Self-interest dominates human behavior;even seemingly selfless behavior is driven by self-interest.
B)   Most people care so deeply about others that self-interest is a minor consideration in their decision making.
C)   The system is most efficient when people focus solely on their self-interest and allow the invisible hand to work out what is best for society.
D)   People are always self-interested to a degree,but their behavior is also affected by moral and ethical considerations.

Question 13

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 14

Anchoring leads people to consider irrelevant information when making decisions.

Accepted Answer

A) True 
 B)False

Question 15

Suppose Gina and Henry play two rounds of the ultimatum game.In the first round they play for $10;in the second round they play for $1,000.In the first round Gina suggests an 80/20 split ($8 to Gina,$2 to Henry) ,but Henry quickly rejects the offer as unfair.If in the second round Gina offers the same split ($800 to Gina,$200 to Henry) ,research by behavioral economists suggests that Henry will:

Accepted Answer

A)   accept the offer because the dollar amount he would forgo by rejecting is substantial.
B)   counteroffer with a more even split.
C)   weigh the offer much more carefully because of the dollar amounts involved but ultimately reject the offer.
D)   exhibit a stronger negative reaction than the first time and ultimately reject the offer.

Question 16

Neoclassical theory suggests that to the extent impulse buying occurs,it is infrequent and does not affect the ability of economic models to predict behavior.

Accepted Answer

A) True 
 B)False

Question 17

Time inconsistency refers to the phenomenon where your present self misjudges what your future self will do.

Accepted Answer

A) True 
 B)False

Question 18

According to behavioral economists,people tend to put too much weight on the future when they make decisions.

Accepted Answer

A) True 
 B)False

Question 19

For economists,"myopia" refers to:

Accepted Answer

A)   visual nearsightedness.
B)   people's difficulty in conceptualizing the future.
C)   people's tendency to put too much emphasis on the future and ignore important present concerns.
D)   people's tendency to focus on microeconomic concerns because of an inability to conceptualize macroeconomics.

Question 20

Heuristics generally help people make faster decisions.

Accepted Answer

A) True 
 B)False

Exam 8: Behavioral Economics

Neoclassical theory suggests that to the extent impulse buying occurs,it is infrequent and does not affect the ability of economic models to predict behavior.

Correct Answer
verified

According to behavioral economists,people tend to put too much weight on the future when they make decisions.

Correct Answer
verified

Time inconsistency refers to the phenomenon where your present self misjudges what your future self will do.

Correct Answer
verified

Which of the following individuals least likely suffers from myopia?

Correct Answer
verified

Prospect theory and the work of behavioral economists confirm that consumers are economically rational.

Correct Answer
verified

Susie knows that too many sugary treats,while delicious when eaten,have long-term adverse effects on weight and health.Based on this information,a behavioral economist would expect Susie to:

Correct Answer
verified

Which of the following statements best reflects behavioral economists' views on self-interest versus the interests of others?

Correct Answer
verified

Heuristics generally help people make faster decisions.

Correct Answer
verified

According to behavioral economics,advertising works because it:

Correct Answer
verified

For economists,"myopia" refers to:

Correct Answer
verified

Internationally,participation differences in organ donation programs are mostly attributed to:

Correct Answer
verified

Specialty shops can charge and get customers to pay higher prices for identical goods than they would pay in "big box" stores.Assuming that these differences are driven by store appearance rather than differences in services provided,which of the following best explains this phenomenon?

Correct Answer
verified

Behavioral economics recognizes that people use System 1 to make decisions more often than they use System 2.Which of the following is an implication of that decision-making process?

Correct Answer
verified

Correct Answer
verified

According to the "endowment effect:"

Correct Answer
verified

Anchoring leads people to consider irrelevant information when making decisions.

Correct Answer
verified

According to behavioral economists,self-control problems generally result from poor information.

Correct Answer
verified

The overconfidence effect exists when people underestimate their chances of being wrong.

Correct Answer
verified

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

Correct Answer
verified

Which of the following individuals received a Nobel Prize in economics for his work in behavioral economics?

Correct Answer
verified

Exam 8: Behavioral Economics

Neoclassical theory suggests that to the extent impulse buying occurs,it is infrequent and does not affect the ability of economic models to predict behavior.

Correct AnswerverifiedShow Answer

According to behavioral economists,people tend to put too much weight on the future when they make decisions.

Correct AnswerverifiedShow Answer

Time inconsistency refers to the phenomenon where your present self misjudges what your future self will do.

Correct AnswerverifiedShow Answer

Which of the following individuals least likely suffers from myopia?

Correct AnswerverifiedShow Answer

Prospect theory and the work of behavioral economists confirm that consumers are economically rational.

Correct AnswerverifiedShow Answer

Susie knows that too many sugary treats,while delicious when eaten,have long-term adverse effects on weight and health.Based on this information,a behavioral economist would expect Susie to:

Correct AnswerverifiedShow Answer

Which of the following statements best reflects behavioral economists' views on self-interest versus the interests of others?

Correct AnswerverifiedShow Answer

Heuristics generally help people make faster decisions.

Correct AnswerverifiedShow Answer

According to behavioral economics,advertising works because it:

Correct AnswerverifiedShow Answer

For economists,"myopia" refers to:

Correct AnswerverifiedShow Answer

Internationally,participation differences in organ donation programs are mostly attributed to:

Correct AnswerverifiedShow Answer

Specialty shops can charge and get customers to pay higher prices for identical goods than they would pay in "big box" stores.Assuming that these differences are driven by store appearance rather than differences in services provided,which of the following best explains this phenomenon?

Correct AnswerverifiedShow Answer

Behavioral economics recognizes that people use System 1 to make decisions more often than they use System 2.Which of the following is an implication of that decision-making process?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the "endowment effect:"

Correct AnswerverifiedShow Answer

Anchoring leads people to consider irrelevant information when making decisions.

Correct AnswerverifiedShow Answer

According to behavioral economists,self-control problems generally result from poor information.

Correct AnswerverifiedShow Answer

The overconfidence effect exists when people underestimate their chances of being wrong.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following individuals received a Nobel Prize in economics for his work in behavioral economics?

Correct AnswerverifiedShow Answer

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