Question 1

"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. 
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 2

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

Question 3

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

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 8

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. 
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 9

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. 
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 10

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. 
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 11

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

Question 12

Heuristics generally help people make fewer errors in their decisions.

Accepted Answer

A) True 
 B)False

Question 13

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? 
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?

Question 14

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 15

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. 
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 16

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

Question 17

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

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

Exam 8: Behavioral Economics

"Impulse buying" is often the result of a

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

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

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

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.

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

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.

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

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

Which of the following individuals least likely suffers from myopia?

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

Heuristics generally help people make fewer errors in their decisions.

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

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.

Neoclassical economics does not hold which of the following assumptions?

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

Myopia means

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

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.

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

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters