Question 1

The hedonic treadmill refers to a phenomenon where

Accepted Answer

A) people can't improve their economic well-being because prices increase as fast as wages. 
B) people can't get out of debt because credit card companies use anchoring to get consumers to carry large balances on their accounts. 
C) increasing our level of consumption doesn't make us any happier in the long term. 
D) feelings of loss offset our feelings of gain, leaving us no happier in the long term. 
A) people can't improve their economic well-being because prices increase as fast as wages. 
B) people can't get out of debt because credit card companies use anchoring to get consumers to carry large balances on their accounts. 
C) increasing our level of consumption doesn't make us any happier in the long term. 
D) feelings of loss offset our feelings of gain, leaving us no happier in the long term.

Question 2

Suppose Justine and Sarah are playing the ultimatum game. Justine is the proposer, has $30 to allocate, and Sarah can accept or reject the offer. Based on repeated experiments of the ultimatum game, what combination of payouts to Justine and Sarah is most likely to occur?

Accepted Answer

A) $30 for Justine and $0 for Sarah 
B) $16 for Justine and $14 for Sarah 
C) $20 for Justine and $10 for Sarah 
D) $0 for Justine and $30 for Sarah 
A) $30 for Justine and $0 for Sarah 
B) $16 for Justine and $14 for Sarah 
C) $20 for Justine and $10 for Sarah 
D) $0 for Justine and $30 for Sarah

Question 3

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.

Question 4

One important consequence of the self-serving 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 5

Describe what is meant by nudging.

Accepted Answer

A key feature of "nudges" is that they a

Question 6

According to behavioral economics, placement of goods in retail stores is often designed to accomplish which of the following?

Accepted Answer

A) maximize impulse buying by consumers 
B) minimize shelving costs 
C) maximize convenience for customers 
D) maximize the amount of product the store can display 
A) maximize impulse buying by consumers 
B) minimize shelving costs 
C) maximize convenience for customers 
D) maximize the amount of product the store can display

Question 7

Internationally, participation differences in organ donation programs are mostly attributed to

Accepted Answer

A) cultural views. 
B) financial compensation for organ donors. 
C) what default option is set for participation or nonparticipation. 
D) living standards as measured by per capita GDP. 
A) cultural views. 
B) financial compensation for organ donors. 
C) what default option is set for participation or nonparticipation. 
D) living standards as measured by per capita GDP.

Question 8

Suppose Gina and Henry play two rounds of the ultimatum game. In the first round they play for $10; in the second round they play for $1,000. In the first round Gina suggests an 80/20 split ($8 to Gina, $2 to Henry), but Henry quickly rejects the offer as unfair. If in the second round Gina offers the same split ($800 to Gina, $200 to Henry), research by behavioral economists suggests that Henry will

Accepted Answer

A) accept the offer because the dollar amount he would forgo by rejecting is substantial. 
B) counteroffer with a more even split. 
C) weigh the offer much more carefully because of the dollar amounts involved but ultimately reject the offer. 
D) exhibit a stronger negative reaction than the first time and ultimately reject the offer. 
A) accept the offer because the dollar amount he would forgo by rejecting is substantial. 
B) counteroffer with a more even split. 
C) weigh the offer much more carefully because of the dollar amounts involved but ultimately reject the offer. 
D) exhibit a stronger negative reaction than the first time and ultimately reject the offer.

Question 9

One major consequence of the overconfidence effect 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 10

Anchoring leads people to consider irrelevant information when making decisions.

Accepted Answer

A) True 
 B)False

Question 11

Heuristics generally help people make fewer errors in their decisions.

Accepted Answer

A) True 
 B)False

Question 12

When people make decisions that go against their own interests, neoclassical economics explains this to be instances where people are

Accepted Answer

A) intentionally not maximizing their net benefit. 
B) ignorant of what their best interests are. 
C) simply incapable of making rational decisions. 
D) behaving quite rationally. 
A) intentionally not maximizing their net benefit. 
B) ignorant of what their best interests are. 
C) simply incapable of making rational decisions. 
D) behaving quite rationally.

Question 13

Heuristics generally help people make faster decisions.

Accepted Answer

A) True 
 B)False

Question 14

Heuristics

Accepted Answer

A) are rules of thumb that generate decisions that generally maximize net benefits. 
B) take a long time to develop and are therefore avoided by rational decision makers. 
C) are shortcuts that save time and energy in decision making. 
D) always waste mental resources by leading people to suboptimal outcomes. 
A) are rules of thumb that generate decisions that generally maximize net benefits. 
B) take a long time to develop and are therefore avoided by rational decision makers. 
C) are shortcuts that save time and energy in decision making. 
D) always waste mental resources by leading people to suboptimal outcomes.

Question 15

Huxley lost $100 in the stock market. According to behavioral economics research, how much of a gain would he have to experience to offset the feeling of loss and have no net change in utility?

Accepted Answer

A) $100 
B) $250 
C) $40 
D) $150 
A) $100 
B) $250 
C) $40 
D) $150

Question 16

Why, according to behavioral economics, would supermarkets place gum, candy, and other small convenience items near the cash registers?

Accepted Answer

A) Those are the shelving locations that minimize costs. 
B) Stores try to make frequently purchased items quicker and easier for consumers to access. 
C) Smaller items tend to fall through shopping cart holes, so stores reduce that problem for consumers by having smaller items at the checkout stands. 
D) Many of these are small items that people will buy on an impulse. 
A) Those are the shelving locations that minimize costs. 
B) Stores try to make frequently purchased items quicker and easier for consumers to access. 
C) Smaller items tend to fall through shopping cart holes, so stores reduce that problem for consumers by having smaller items at the checkout stands. 
D) Many of these are small items that people will buy on an impulse.

Question 17

Define behavioral economics, and discuss why it was developed.

Accepted Answer

Behavioral economics is a branch of econ

Question 18

Firms would rather shrink package sizes than raise prices because consumers will feel less of a loss from the change in package size.

Accepted Answer

A) True 
 B)False

Question 19

The idea of "nudging" people into certain choices is one major contribution of behavioral economics to policy making.

Accepted Answer

A) True 
 B)False

Question 20

According to behavioral economics research, in which of the following cases would we expect a person to experience no net change in their utility?

Accepted Answer

A) When the person gains $100 and loses $100. 
B) When the person gains $250 and loses $100. 
C) When the person gains $100 and loses $250. 
D) When the person gains $100 while everyone else gains $200. 
A) When the person gains $100 and loses $100. 
B) When the person gains $250 and loses $100. 
C) When the person gains $100 and loses $250. 
D) When the person gains $100 while everyone else gains $200.

Exam 8: Behavioral Economics

The hedonic treadmill refers to a phenomenon where

Suppose Justine and Sarah are playing the ultimatum game. Justine is the proposer, has $30 to allocate, and Sarah can accept or reject the offer. Based on repeated experiments of the ultimatum game, what combination of payouts to Justine and Sarah is most likely to occur?

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

One important consequence of the self-serving bias is that

Describe what is meant by nudging.

According to behavioral economics, placement of goods in retail stores is often designed to accomplish which of the following?

Internationally, participation differences in organ donation programs are mostly attributed to

One major consequence of the overconfidence effect is that

Anchoring leads people to consider irrelevant information when making decisions.

Heuristics generally help people make fewer errors in their decisions.

When people make decisions that go against their own interests, neoclassical economics explains this to be instances where people are

Heuristics generally help people make faster decisions.

Heuristics

Huxley lost $100 in the stock market. According to behavioral economics research, how much of a gain would he have to experience to offset the feeling of loss and have no net change in utility?

Why, according to behavioral economics, would supermarkets place gum, candy, and other small convenience items near the cash registers?

Define behavioral economics, and discuss why it was developed.

Firms would rather shrink package sizes than raise prices because consumers will feel less of a loss from the change in package size.

The idea of "nudging" people into certain choices is one major contribution of behavioral economics to policy making.

According to behavioral economics research, in which of the following cases would we expect a person to experience no net change in their utility?

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

Filters