Question 1

Most people's natural aversion against complex mathematical problems is an example of

Accepted Answer

A) confirmation bias. 
B) a mental heuristic. 
C) rational choice. 
D) cognitive bias. 
A) confirmation bias. 
B) a mental heuristic. 
C) rational choice. 
D) cognitive bias.

Question 2

Brain scientists have found that the human brain devotes more neurons toward processing and interpreting visual information than it does to anything else.Therefore,

Accepted Answer

A) we can always believe what our eyes tell us. 
B) we should only believe what our eyes tell us. 
C) since our eyes can fool us, we probably make mental mistakes in other areas too. 
D) behavioral and neoclassical economists agree that our visual impressions are always right. 
A) we can always believe what our eyes tell us. 
B) we should only believe what our eyes tell us. 
C) since our eyes can fool us, we probably make mental mistakes in other areas too. 
D) behavioral and neoclassical economists agree that our visual impressions are always right.

Question 3

Behavioral economists believe that while people try to make rational decisions, they are frequently subject to systematic errors.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following does not illustrate the use of heuristics?

Accepted Answer

A) baseball players locking their eyes on the ball in order to have a good chance of catching it 
B) scientists using the laws of physics and mathematics to predict where billiard balls will roll 
C) companies spending a lot on advertising in order to make their brands better known 
D) staying upright on a bicycle by steering in the direction of a fall when one begins to happen 
A) baseball players locking their eyes on the ball in order to have a good chance of catching it 
B) scientists using the laws of physics and mathematics to predict where billiard balls will roll 
C) companies spending a lot on advertising in order to make their brands better known 
D) staying upright on a bicycle by steering in the direction of a fall when one begins to happen

Question 5

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. 
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 6

The threat of rejection is part of what makes the invisible hand a valid metaphor for how the market system works.

Accepted Answer

A) True 
 B)False

Question 7

Scientists studying human behavior have found that people tend to

Accepted Answer

A) always make rational decisions. 
B) make systematic errors in their decisions. 
C) make only random errors in their decisions. 
D) always make decisions that are not rational. 
A) always make rational decisions. 
B) make systematic errors in their decisions. 
C) make only random errors in their decisions. 
D) always make decisions that are not rational.

Question 8

Automatic payroll deductions help people to fight their time inconsistency problem with regards to saving.

Accepted Answer

A) True 
 B)False

Question 9

Framing effects may cause the same person to view the same new situation differently depending on whether that new situation makes him or her better or worse off.

Accepted Answer

A) True 
 B)False

Question 10

The dictator and ultimatum games reveal that fairness and concern for others motivate people's behavior.

Accepted Answer

A) True 
 B)False

Question 11

That most people would prefer to buy meat that is 80 percent lean rather than meat that is 20 percent fat is an illustration of the

Accepted Answer

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

Question 12

Recognition heuristics help advertisers gain customers.

Accepted Answer

A) True 
 B)False

Question 13

Myopia and time inconsistency are major stumbling blocks that behavioral economists have found in people's ability to make decisions that involve trade-offs between

Accepted Answer

A) importing and exporting. 
B) wor k and leisure. 
C) the private sector and the government. 
D) the present and the future. 
A) importing and exporting. 
B) wor k and leisure. 
C) the private sector and the government. 
D) the present and the future.

Question 14

People feel losses about two and a half times more intensely than they feel gains.

Accepted Answer

A) True 
 B)False

Question 15

People's tendency to attribute their successes to personal effort or a special personal trait, while blaming their failures on the faults of others or on something beyond their control is called

Accepted Answer

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

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

Behavioral economists have not discovered which of the following things about people's reaction to losses?

Accepted Answer

A) People judge losses in relative terms; i.e., relative to the status quo. 
B) People experience increasing marginal disutility from losses. 
C) People would feel the loss of $1,000 more intensely than they would feel the gain of $1,000. 
D) When people lose successive equal amounts, the initial losses are more painful than later ones. 
A) People judge losses in relative terms; i.e., relative to the status quo. 
B) People experience increasing marginal disutility from losses. 
C) People would feel the loss of $1,000 more intensely than they would feel the gain of $1,000. 
D) When people lose successive equal amounts, the initial losses are more painful than later ones.

Question 18

The so-called Lake Wobegon effect, where everyone in a group claims to be above average, illustrates 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.

Question 19

Results of the dictator and ultimatum games reveal that people act in equally self-interested ways, regardless of the context or rules of the game.

Accepted Answer

A) True 
 B)False

Question 20

Both neoclassical and behavioral economics believe that people are mostly rational in both their decision making and their actions.

Accepted Answer

A) True 
 B)False

Exam 8: Behavioral Economics

Most people's natural aversion against complex mathematical problems is an example of

Brain scientists have found that the human brain devotes more neurons toward processing and interpreting visual information than it does to anything else.Therefore,

Behavioral economists believe that while people try to make rational decisions, they are frequently subject to systematic errors.

Which of the following does not illustrate the use of heuristics?

For economists, "myopia" refers to

The threat of rejection is part of what makes the invisible hand a valid metaphor for how the market system works.

Scientists studying human behavior have found that people tend to

Automatic payroll deductions help people to fight their time inconsistency problem with regards to saving.

Framing effects may cause the same person to view the same new situation differently depending on whether that new situation makes him or her better or worse off.

The dictator and ultimatum games reveal that fairness and concern for others motivate people's behavior.

That most people would prefer to buy meat that is 80 percent lean rather than meat that is 20 percent fat is an illustration of the

Recognition heuristics help advertisers gain customers.

Myopia and time inconsistency are major stumbling blocks that behavioral economists have found in people's ability to make decisions that involve trade-offs between

People feel losses about two and a half times more intensely than they feel gains.

People's tendency to attribute their successes to personal effort or a special personal trait, while blaming their failures on the faults of others or on something beyond their control is called

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.

Behavioral economists have not discovered which of the following things about people's reaction to losses?

The so-called Lake Wobegon effect, where everyone in a group claims to be above average, illustrates the

Results of the dictator and ultimatum games reveal that people act in equally self-interested ways, regardless of the context or rules of the game.

Both neoclassical and behavioral economics believe that people are mostly rational in both their decision making and their actions.

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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