Question 1

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 2

According to behavioral economics,

Accepted Answer

A) gains are felt more intensely than losses. 
B) each successive unit of loss is equal in its marginal disutility. 
C) each successive unit of loss hurts, but less than the previous unit. 
D) each successive unit of loss hurts, and more than the previous unit. 
A) gains are felt more intensely than losses. 
B) each successive unit of loss is equal in its marginal disutility. 
C) each successive unit of loss hurts, but less than the previous unit. 
D) each successive unit of loss hurts, and more than the previous unit.

Question 3

Behavioral economists suggest that brand loyalty, which can be a source of monopoly power for the producer, may be explained by consumers' tendency to have the

Accepted Answer

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

Question 4

When people change their decision just because the context of the given information is changed, we call that the "framing effect."

Accepted Answer

A) True 
 B)False

Question 5

"Heuristics" used by the human brain are one of the reasons why

Accepted Answer

A) our preferences are quite stable and consistent. 
B) neoclassical economic models accurately predict human behavior. 
C) human perception is susceptible to context and prone to error. 
D) the utility-maximizing model of decision making is precise. 
A) our preferences are quite stable and consistent. 
B) neoclassical economic models accurately predict human behavior. 
C) human perception is susceptible to context and prone to error. 
D) the utility-maximizing model of decision making is precise.

Question 6

One important consequence of the confirmation bias is that

Accepted Answer

A) some people cannot correct a personal trait that might be causing them to fail in many ventures. 
B) someone could persist in pursuing a failed policy despite overwhelming evidence of the failure. 
C) bad decisions can be made because people will act without pausing to see whether their intuition is correct or not. 
D) some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments. 
A) some people cannot correct a personal trait that might be causing them to fail in many ventures. 
B) someone could persist in pursuing a failed policy despite overwhelming evidence of the failure. 
C) bad decisions can be made because people will act without pausing to see whether their intuition is correct or not. 
D) some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments.

Question 7

The threat of rejection in market transactions

Accepted Answer

A) leads to higher prices, as sellers try to cover possible losses. 
B) leads to better products and lower prices for consumers. 
C) leads to less cooperation between buyers and sellers. 
D) does all of these. 
A) leads to higher prices, as sellers try to cover possible losses. 
B) leads to better products and lower prices for consumers. 
C) leads to less cooperation between buyers and sellers. 
D) does all of these.

Question 8

When people react to (or perceive)identical situations differently in different contexts, behavioral economists refer to that as 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 9

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 10

Key features of so-called nudges include the following, except that

Accepted Answer

A) they are subtle. 
B) they induce changes in behavior without bullying or coercion. 
C) they involve significant monetary incentives. 
D) they can be viewed by some as manipulation. 
A) they are subtle. 
B) they induce changes in behavior without bullying or coercion. 
C) they involve significant monetary incentives. 
D) they can be viewed by some as manipulation.

Question 11

According to behavioral economists, the human brain frequently employs heuristics because

Accepted Answer

A) people have consciously trained their brains to do so. 
B) these shortcuts minimize errors in decision making. 
C) they produce more optimal outcomes than do rational calculations of benefits and costs. 
D) they save energy and time in decision making. 
A) people have consciously trained their brains to do so. 
B) these shortcuts minimize errors in decision making. 
C) they produce more optimal outcomes than do rational calculations of benefits and costs. 
D) they save energy and time in decision making.

Question 12

Should we view neoclassical economics and behavioral economics as mutually exclusive or as complementary?

Accepted Answer

We should view them as complementary app

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would represent a systematic error?

Accepted Answer

A) Eddie regularly overspends. Friends and family bail him out, however, so he always ends up with what he wants. 
B) Ellen paid good money for a used car that is in constant need of repair. 
C) Sparky determines that he has to reduce donut consumption to lose weight but always ends up eating the ones provided in the break room at work. 
D) Clark makes regular math errors at work, sometimes coming out with figures too high, other times too low. 
A) Eddie regularly overspends. Friends and family bail him out, however, so he always ends up with what he wants. 
B) Ellen paid good money for a used car that is in constant need of repair. 
C) Sparky determines that he has to reduce donut consumption to lose weight but always ends up eating the ones provided in the break room at work. 
D) Clark makes regular math errors at work, sometimes coming out with figures too high, other times too low.

Question 15

Neoclassical economics and behavioral economics are similar in the assumption that people are capable of making accurate, sometimes complex, calculations with respect to their utility-maximizing decisions.

Accepted Answer

A) True 
 B)False

Question 16

Heuristics generally operate in brain System 2.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Many economists believe that the neoclassical theories of human behavior and the insights being accumulated in behavioral economics are basically

Accepted Answer

A) opposed to one another. 
B) mutually exclusive to one another. 
C) complementary to one another. 
D) in agreement with one another. 
A) opposed to one another. 
B) mutually exclusive to one another. 
C) complementary to one another. 
D) in agreement with one another.

Question 19

Prospect theory is based on behavioral economists' understanding of how people

Accepted Answer

A) react to good things (or gains)and bad (or losses). 
B) make predictions about their future income. 
C) search for job prospects or business prospects. 
D) behave under stressful conditions. 
A) react to good things (or gains)and bad (or losses). 
B) make predictions about their future income. 
C) search for job prospects or business prospects. 
D) behave under stressful conditions.

Question 20

When people convince themselves that they "knew all along" what was going to happen, when in fact their predictions were incorrect, they suffer from

Accepted Answer

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

Exam 8: Behavioral Economics

Myopia means

According to behavioral economics,

Behavioral economists suggest that brand loyalty, which can be a source of monopoly power for the producer, may be explained by consumers' tendency to have the

When people change their decision just because the context of the given information is changed, we call that the "framing effect."

"Heuristics" used by the human brain are one of the reasons why

One important consequence of the confirmation bias is that

The threat of rejection in market transactions

When people react to (or perceive)identical situations differently in different contexts, behavioral economists refer to that as the

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.

Key features of so-called nudges include the following, except that

According to behavioral economists, the human brain frequently employs heuristics because

Should we view neoclassical economics and behavioral economics as mutually exclusive or as complementary?

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

Which of the following would represent a systematic error?

Neoclassical economics and behavioral economics are similar in the assumption that people are capable of making accurate, sometimes complex, calculations with respect to their utility-maximizing decisions.

Heuristics generally operate in brain System 2.

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

Many economists believe that the neoclassical theories of human behavior and the insights being accumulated in behavioral economics are basically

Prospect theory is based on behavioral economists' understanding of how people

When people convince themselves that they "knew all along" what was going to happen, when in fact their predictions were incorrect, they suffer from

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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