Question 1

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. 
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 2

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 3

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 4

Neoclassical economists generally believe which of the following about human behavior?

Accepted Answer

A) While individuals attempt to make rational decisions, poor computational skills often lead to systematic errors. 
B) People care a lot about fairness and are often willing to sacrifice some of their own well-being to treat others fairly. 
C) When individuals make mistakes in decision making, they adjust to these errors and rarely repeat them. 
D) When individuals are selfless and act for the good of others, the invisible hand guides the collective behaviors to promote the good of society. 
A) While individuals attempt to make rational decisions, poor computational skills often lead to systematic errors. 
B) People care a lot about fairness and are often willing to sacrifice some of their own well-being to treat others fairly. 
C) When individuals make mistakes in decision making, they adjust to these errors and rarely repeat them. 
D) When individuals are selfless and act for the good of others, the invisible hand guides the collective behaviors to promote the good of society.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

One major consequence of the planning fallacy is that

Accepted Answer

A) people may spend more resources to insure themselves against rare events, but leave themselves uninsured against more common events. 
B) someone could persist in pursuing a failed policy despite overwhelming evidence of the failure. 
C) major business projects may create bottlenecks in the organization because they are not completed as scheduled. 
D) some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments. 
A) people may spend more resources to insure themselves against rare events, but leave themselves uninsured against more common events. 
B) someone could persist in pursuing a failed policy despite overwhelming evidence of the failure. 
C) major business projects may create bottlenecks in the organization because they are not completed as scheduled. 
D) some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments.

Question 7

What field evidence is available to help behavioral economists identify the ethical and moral factors that appear to have the largest influence on economic behavior.

Accepted Answer

Giving to Charity: Each year, U. S. char

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The anchoring effect suggests that when people are made to think of large abstract numbers before they go shopping, many of them will subsequently be willing to pay higher prices for stuff.

Accepted Answer

A) True 
 B)False

Question 10

Behavioral economics assumes that people are

Accepted Answer

A) eager and able to estimate the benefits and costs of their decisions. 
B) very much aware of their preferences and are consistent in their preferences. 
C) prone to falling prey to temptation because they lack sufficient willpower. 
D) always focusing on their self-interest and maximizing their own net benefits. 
A) eager and able to estimate the benefits and costs of their decisions. 
B) very much aware of their preferences and are consistent in their preferences. 
C) prone to falling prey to temptation because they lack sufficient willpower. 
D) always focusing on their self-interest and maximizing their own net benefits.

Question 11

Neoclassical economic analysis tends to disregard the following motivations in people's decisions and actions, except

Accepted Answer

A) charity. 
B) selflessness. 
C) self-interest. 
D) focus on the common good. 
A) charity. 
B) selflessness. 
C) self-interest. 
D) focus on the common good.

Question 12

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 13

"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 14

Suppose Faith and Mickey are playing both dictator and ultimatum games. Faith is the dictator/proposer and has $1,000 to allocate. Based on repeated experiments of the dictator and ultimatum games, what payouts to Mickey would be most consistent with the findings of behavioral economists?

Accepted Answer

A) Mickey receives $0 from the dictator game and $100 from the ultimatum game. 
B) Mickey receives $500 from the dictator game and $420 from the ultimatum game. 
C) Mickey receives $500 from the dictator game and $500 from the ultimatum game. 
D) Mickey receives $420 from the dictator game and $470 from the ultimatum game. 
A) Mickey receives $0 from the dictator game and $100 from the ultimatum game. 
B) Mickey receives $500 from the dictator game and $420 from the ultimatum game. 
C) Mickey receives $500 from the dictator game and $500 from the ultimatum game. 
D) Mickey receives $420 from the dictator game and $470 from the ultimatum game.

Question 15

One explanation for why major construction projects often get completed way behind schedule is 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 16

Suppose Faith and Mickey are playing both dictator and ultimatum games. Faith is the dictator/proposer and has $1,000 to allocate. Based on repeated experiments of the dictator and ultimatum games, what payouts to Mickey would be most consistent with the findings of behavioral economists?

Accepted Answer

A) Mickey receives $0 from the dictator game and $100 from the ultimatum game. 
B) Mickey receives $500 from the dictator game and $420 from the ultimatum game. 
C) Mickey receives $500 from the dictator game and $500 from the ultimatum game. 
D) Mickey receives $420 from the dictator game and $470 from the ultimatum game. 
A) Mickey receives $0 from the dictator game and $100 from the ultimatum game. 
B) Mickey receives $500 from the dictator game and $420 from the ultimatum game. 
C) Mickey receives $500 from the dictator game and $500 from the ultimatum game. 
D) Mickey receives $420 from the dictator game and $470 from the ultimatum game.

Question 17

Edgar and Felicity are players in an ultimatum game for $100, where Felicity is the proposer and Edgar is the responder. Suppose that Felicity proposes that she receive $95, while Edgar receives only $5. How would behavioral economists expect Edgar to respond?

Accepted Answer

A) Even though Edgar would be better off having $5 versus nothing, Edgar will likely see the offer as unfair and reject it. 
B) Edgar will accept the $5, as rejecting it would be economically irrational. 
C) Edgar will suggest a counteroffer that he would accept. 
D) Edgar will accept the offer if he is thinking with brain System 1 but reject it if thinking with brain System 2. 
A) Even though Edgar would be better off having $5 versus nothing, Edgar will likely see the offer as unfair and reject it. 
B) Edgar will accept the $5, as rejecting it would be economically irrational. 
C) Edgar will suggest a counteroffer that he would accept. 
D) Edgar will accept the offer if he is thinking with brain System 1 but reject it if thinking with brain System 2.

Question 18

Josh will receive a salary 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 salary 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 salary depends on how much he made in the past.

Question 19

Fairness, according to behavioral economics,

Accepted Answer

A) is too subjective to be considered in the analysis of economic behavior. 
B) can be objectively standardized across individuals. 
C) varies from one individual to another but still affects economic behavior in important ways. 
D) matters to people, but because of self-interest, fairness has little effect on their economic decisions. 
A) is too subjective to be considered in the analysis of economic behavior. 
B) can be objectively standardized across individuals. 
C) varies from one individual to another but still affects economic behavior in important ways. 
D) matters to people, but because of self-interest, fairness has little effect on their economic decisions.

Question 20

Examples of precommitments to deal with people's time inconsistency problems include the following, except

Accepted Answer

A) automatic payroll deductions. 
B) debit card accounts. 
C) early withdrawal penalties. 
D) salary smoothing. 
A) automatic payroll deductions. 
B) debit card accounts. 
C) early withdrawal penalties. 
D) salary smoothing.

Exam 8: Behavioral Economics

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

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

Solar City helped homeowners overcome their myopia by

Neoclassical economists generally believe which of the following about human behavior?

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

One major consequence of the planning fallacy is that

What field evidence is available to help behavioral economists identify the ethical and moral factors that appear to have the largest influence on economic behavior.

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

The anchoring effect suggests that when people are made to think of large abstract numbers before they go shopping, many of them will subsequently be willing to pay higher prices for stuff.

Behavioral economics assumes that people are

Neoclassical economic analysis tends to disregard the following motivations in people's decisions and actions, except

The threat of rejection in market transactions

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

Suppose Faith and Mickey are playing both dictator and ultimatum games. Faith is the dictator/proposer and has $1,000 to allocate. Based on repeated experiments of the dictator and ultimatum games, what payouts to Mickey would be most consistent with the findings of behavioral economists?

One explanation for why major construction projects often get completed way behind schedule is the

Suppose Faith and Mickey are playing both dictator and ultimatum games. Faith is the dictator/proposer and has $1,000 to allocate. Based on repeated experiments of the dictator and ultimatum games, what payouts to Mickey would be most consistent with the findings of behavioral economists?

Edgar and Felicity are players in an ultimatum game for $100, where Felicity is the proposer and Edgar is the responder. Suppose that Felicity proposes that she receive $95, while Edgar receives only $5. How would behavioral economists expect Edgar to respond?

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

Fairness, according to behavioral economics,

Examples of precommitments to deal with people's time inconsistency problems include the following, except

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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