Question 1

The threat of rejection in market transactions

Accepted Answer

A) leads to better products for consumers. 
B) leads to lower prices for consumers. 
C) leads to greater cooperation between buyers and sellers. 
D) does all of these. 
A) leads to better products for consumers. 
B) leads to lower prices for consumers. 
C) leads to greater cooperation between buyers and sellers. 
D) does all of these.

Question 2

Precommitments are a tool designed to overcome time inconsistency.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Self-control problems, say, among people on a diet, is caused by the cognitive bias known as time inconsistency.

Accepted Answer

A) True 
 B)False

Question 5

(Consider This) Solar City helped homeowners overcome their myopia by

Accepted Answer

A) providing improved information about the benefits of solar systems. 
B) framing the installation of solar systems against the environmental costs of nonrenewable energy sources. 
C) eliminating the upfront costs of solar systems. 
D) appealing to homeowners' sense of fairness with regard to environmental responsibility. 
A) providing improved information about the benefits of solar systems. 
B) framing the installation of solar systems against the environmental costs of nonrenewable energy sources. 
C) eliminating the upfront costs of solar systems. 
D) appealing to homeowners' sense of fairness with regard to environmental responsibility.

Question 6

The human tendency to believe only those data that agree with one's preconceptions and ignore other data that contradict the preconceptions is called

Accepted Answer

A) confirmation bias. 
B) self-serving bias. 
C) overconfidence effect. 
D) availability heuristic. 
A) confirmation bias. 
B) self-serving bias. 
C) overconfidence effect. 
D) availability heuristic.

Question 7

"Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.

Accepted Answer

A) True 
 B)False

Question 8

Dan was certain that his upcoming economics test would be so easy that he could wait to study until the night before and still do well on the exam.When he cracked open his book and notes the night before the exam, he realized he should've started studying earlier.According to behavioral economics, Dan's error was caused primarily by

Accepted Answer

A) a planning fallacy. 
B) an overconfidence effect. 
C) framing effects. 
D) hindsight bias. 
A) a planning fallacy. 
B) an overconfidence effect. 
C) framing effects. 
D) hindsight bias.

Question 9

The endowment effect makes people value things less when they think of those things as their own as opposed to identical things that are not theirs-as in "the grass is greener on the other side."

Accepted Answer

A) True 
 B)False

Question 10

Natural disasters often cause shortages of critical supplies.What outcomes would neoclassical and behavioral economics typically predict from these events?

Accepted Answer

A) Both would expect prices to rise significantly, whether from market forces or from self-interest overwhelming any sense of compassion for others. 
B) Both would expect sellers to keep prices unchanged, whether to keep customers happy long-term or out of a sense of fairness. 
C) Neoclassical economists would expect economic chaos and collapse, while behavioral economists would expect everyone to act cooperatively. 
D) Neoclassical economists would expect prices to rise dramatically as a natural result of the greater scarcity, and behavioral economists would expect prices to increase less or not at all as people try not to take advantage of the situation. 
A) Both would expect prices to rise significantly, whether from market forces or from self-interest overwhelming any sense of compassion for others. 
B) Both would expect sellers to keep prices unchanged, whether to keep customers happy long-term or out of a sense of fairness. 
C) Neoclassical economists would expect economic chaos and collapse, while behavioral economists would expect everyone to act cooperatively. 
D) Neoclassical economists would expect prices to rise dramatically as a natural result of the greater scarcity, and behavioral economists would expect prices to increase less or not at all as people try not to take advantage of the situation.

Question 11

Prospect theory explains the status-quo bias as a combination of loss aversion and the

Accepted Answer

A) anchoring effect. 
B) mental accounting effect. 
C) endowment effect. 
D) confirmation bias. 
A) anchoring effect. 
B) mental accounting effect. 
C) endowment effect. 
D) confirmation bias.

Question 12

System 1 is the part of the brain that carefully weighs the benefits and costs when making decisions.

Accepted Answer

A) True 
 B)False

Question 13

One of the important contributions of behavioral economics is the focus on how people make decisions involving

Accepted Answer

A) goods and services. 
B) inputs and outputs. 
C) good things and bad things. 
D) prices and money. 
A) goods and services. 
B) inputs and outputs. 
C) good things and bad things. 
D) prices and money.

Question 14

The "anchoring" phenomenon observed by behavioral economists refers to the fact that people's estimates of the value of things are affected by

Accepted Answer

A) recently considered information. 
B) their childhood memories. 
C) irrelevant data always. 
D) relevant information solely. 
A) recently considered information. 
B) their childhood memories. 
C) irrelevant data always. 
D) relevant information solely.

Question 15

Behavioral economists believe that people

Accepted Answer

A) assess current and future options equally well. 
B) do not care about fairness, especially if it impairs their ability to get what they want. 
C) make errors in decision making because of problems such as bad information, but such errors are random and generally not repeated by the same individual. 
D) often succumb to temptation. 
A) assess current and future options equally well. 
B) do not care about fairness, especially if it impairs their ability to get what they want. 
C) make errors in decision making because of problems such as bad information, but such errors are random and generally not repeated by the same individual. 
D) often succumb to temptation.

Question 16

(Last Word) The BIT helped poor people in the Philippines increase their saving by offering "commitment" savings accounts that restricted withdrawals until certain dates or savings targets were reached.This is an example of

Accepted Answer

A) a nudge. 
B) anchoring. 
C) mental accounting. 
D) endowment effects. 
A) a nudge. 
B) anchoring. 
C) mental accounting. 
D) endowment effects.

Question 17

Which of the following cognitive biases refers to people's tendency to attribute their successes to personal ability and effort, and failures to forces outside their control?

Accepted Answer

A) overconfidence effect 
B) confirmation bias 
C) self-serving bias 
D) hindsight bias 
A) overconfidence effect 
B) confirmation bias 
C) self-serving bias 
D) hindsight bias

Question 18

(Last Word) The United Kingdom's Behavioral Insights Team substantially increased the amount of income tax collected each year by

Accepted Answer

A) printing frowning face emoticons on correspondence to delinquent payers. 
B) mailing letters to those who had not yet paid, telling them that their neighbors had paid. 
C) establishing an automatic payroll withdrawal system to collect taxes. 
D) sending delinquent payers pictures of poor children. 
A) printing frowning face emoticons on correspondence to delinquent payers. 
B) mailing letters to those who had not yet paid, telling them that their neighbors had paid. 
C) establishing an automatic payroll withdrawal system to collect taxes. 
D) sending delinquent payers pictures of poor children.

Question 19

When people react to (or perceive) identical situations differently in different contexts, we call that the

Accepted Answer

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

Question 20

Some people's tendency to believe that they are better than average at making judgments or opinions is called the

Accepted Answer

A) confirmation bias. 
B) framing effect. 
C) overconfidence effect. 
D) self-serving bias. 
A) confirmation bias. 
B) framing effect. 
C) overconfidence effect. 
D) self-serving bias.

Exam 8: Behavioral Economics

The threat of rejection in market transactions

Precommitments are a tool designed to overcome time inconsistency.

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

Self-control problems, say, among people on a diet, is caused by the cognitive bias known as time inconsistency.

(Consider This) Solar City helped homeowners overcome their myopia by

The human tendency to believe only those data that agree with one's preconceptions and ignore other data that contradict the preconceptions is called

"Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.

The endowment effect makes people value things less when they think of those things as their own as opposed to identical things that are not theirs-as in "the grass is greener on the other side."

Natural disasters often cause shortages of critical supplies.What outcomes would neoclassical and behavioral economics typically predict from these events?

Prospect theory explains the status-quo bias as a combination of loss aversion and the

System 1 is the part of the brain that carefully weighs the benefits and costs when making decisions.

One of the important contributions of behavioral economics is the focus on how people make decisions involving

The "anchoring" phenomenon observed by behavioral economists refers to the fact that people's estimates of the value of things are affected by

Behavioral economists believe that people

(Last Word) The BIT helped poor people in the Philippines increase their saving by offering "commitment" savings accounts that restricted withdrawals until certain dates or savings targets were reached.This is an example of

Which of the following cognitive biases refers to people's tendency to attribute their successes to personal ability and effort, and failures to forces outside their control?

(Last Word) The United Kingdom's Behavioral Insights Team substantially increased the amount of income tax collected each year by

When people react to (or perceive) identical situations differently in different contexts, we call that the

Some people's tendency to believe that they are better than average at making judgments or opinions is called the

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

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