Question 1

According to behavioral economists, the human brain

Accepted Answer

A) makes most decisions based on careful calculation of benefits and costs. 
B) uses evolutionary-developed heuristics to make many decisions. 
C) only develops heuristics for decision making after the same decision has been made multiple times using a rational framework of comparing benefits and costs. 
D) employs heuristics in decision making that are slow but generally error free. 
A) makes most decisions based on careful calculation of benefits and costs. 
B) uses evolutionary-developed heuristics to make many decisions. 
C) only develops heuristics for decision making after the same decision has been made multiple times using a rational framework of comparing benefits and costs. 
D) employs heuristics in decision making that are slow but generally error free.

Question 2

Neoclassical economics and behavioral economics both recognize that people make errors in their decision making.

Accepted Answer

A) True 
 B)False

Question 3

Heuristics can be exploited to lead people to positive outcomes.

Accepted Answer

A) True 
 B)False

Question 4

One implication of the phenomenon described by economist Richard Easterlin as the "hedonic treadmill" is that

Accepted Answer

A) people who consume more goods and services are happier than those who consume less. 
B) people can only become happier if their consumption continues rising indefinitely. 
C) there is a threshold of consumption that one must cross before one can be happy. 
D) we can combine the happiness of different individuals to get "total happiness." 
A) people who consume more goods and services are happier than those who consume less. 
B) people can only become happier if their consumption continues rising indefinitely. 
C) there is a threshold of consumption that one must cross before one can be happy. 
D) we can combine the happiness of different individuals to get "total happiness."

Question 5

The neoclassical economists' "invisible hand" of the market is driven by people's

Accepted Answer

A) sense of fairness. 
B) generosity. 
C) self-interest. 
D) time inconsistency. 
A) sense of fairness. 
B) generosity. 
C) self-interest. 
D) time inconsistency.

Question 6

Parker's shares of stock in ACME Corporation lost $10 in value, but his shares in XYZ, Inc. gained $18. According to behavioral economics research, how would Parker feel as a result of these changes?

Accepted Answer

A) Parker would feel better off. 
B) Parker would feel worse off. 
C) Parker would feel about the same. 
D) Behavioral economics research suggest that the intensity of losses versus gains follows no measurable pattern. 
A) Parker would feel better off. 
B) Parker would feel worse off. 
C) Parker would feel about the same. 
D) Behavioral economics research suggest that the intensity of losses versus gains follows no measurable pattern.

Question 7

According to behavioral economists, self-control problems

Accepted Answer

A) are a rare aberration from rational decision making. 
B) are often caused by time inconsistency. 
C) can be easily overcome by providing decision makers with better information. 
D) occur frequently but have no impact on the ability of neoclassical models to predict economic outcomes. 
A) are a rare aberration from rational decision making. 
B) are often caused by time inconsistency. 
C) can be easily overcome by providing decision makers with better information. 
D) occur frequently but have no impact on the ability of neoclassical models to predict economic outcomes.

Question 8

According to prospect theory, what strategy will firms typically employ with regard to pricing and packaging of their goods, when faced with rising production costs?

Accepted Answer

A) Firms will increase both package sizes and prices but will increase prices more to communicate to consumers that the product has greater value. 
B) Firms will reduce package sizes but keep prices the same, thus increasing the per unit price of the good. 
C) Firms will keep package sizes the same but lower prices and attempt to cover the higher costs with greater revenue. 
D) According to prospect theory, the choice of strategy doesn't matter, as consumers are generally able to recognize price increases regardless of what form they take. 
A) Firms will increase both package sizes and prices but will increase prices more to communicate to consumers that the product has greater value. 
B) Firms will reduce package sizes but keep prices the same, thus increasing the per unit price of the good. 
C) Firms will keep package sizes the same but lower prices and attempt to cover the higher costs with greater revenue. 
D) According to prospect theory, the choice of strategy doesn't matter, as consumers are generally able to recognize price increases regardless of what form they take.

Question 9

Neoclassical economics assumes the following as major motivators of decisions and actions, except

Accepted Answer

A) utility maximization. 
B) loss minimization. 
C) sense of fairness. 
D) self-interest. 
A) utility maximization. 
B) loss minimization. 
C) sense of fairness. 
D) self-interest.

Question 10

According to behavioral economists, precommitments

Accepted Answer

A) help people overcome their self-control problems caused by time inconsistency. 
B) do not fundamentally alter decisions because they do not change the benefits or costs of a particular action. 
C) end up being more costly, as people regularly violate them and incur penalties. 
D) overcome cognitive biases introduced by brain System 2. 
A) help people overcome their self-control problems caused by time inconsistency. 
B) do not fundamentally alter decisions because they do not change the benefits or costs of a particular action. 
C) end up being more costly, as people regularly violate them and incur penalties. 
D) overcome cognitive biases introduced by brain System 2.

Question 11

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

Accepted Answer

A) True 
 B)False

According to behavioral economists, the human brain

Neoclassical economics and behavioral economics both recognize that people make errors in their decision making.

Heuristics can be exploited to lead people to positive outcomes.

One implication of the phenomenon described by economist Richard Easterlin as the "hedonic treadmill" is that

The neoclassical economists' "invisible hand" of the market is driven by people's

Parker's shares of stock in ACME Corporation lost $10 in value, but his shares in XYZ, Inc. gained $18. According to behavioral economics research, how would Parker feel as a result of these changes?

According to behavioral economists, self-control problems

According to prospect theory, what strategy will firms typically employ with regard to pricing and packaging of their goods, when faced with rising production costs?

Neoclassical economics assumes the following as major motivators of decisions and actions, except

According to behavioral economists, precommitments

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

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

Exam 8: Behavioral Economics

According to behavioral economists, the human brain

Neoclassical economics and behavioral economics both recognize that people make errors in their decision making.

Heuristics can be exploited to lead people to positive outcomes.

One implication of the phenomenon described by economist Richard Easterlin as the "hedonic treadmill" is that

The neoclassical economists' "invisible hand" of the market is driven by people's

Parker's shares of stock in ACME Corporation lost $10 in value, but his shares in XYZ, Inc. gained $18. According to behavioral economics research, how would Parker feel as a result of these changes?

According to behavioral economists, self-control problems

According to prospect theory, what strategy will firms typically employ with regard to pricing and packaging of their goods, when faced with rising production costs?

Neoclassical economics assumes the following as major motivators of decisions and actions, except

According to behavioral economists, precommitments

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

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