Question 1

Behavioral economists put significant emphasis on using models to

Accepted Answer

A) predict decisions, but not so much to understand how those decisions are made. 
B) predict decisions and also to understand how those decisions are made. 
C) understand decision processes, but not the prediction of the decision itself. 
D) understand people's actions, but not what drives people to act in certain ways. 
A) predict decisions, but not so much to understand how those decisions are made. 
B) predict decisions and also to understand how those decisions are made. 
C) understand decision processes, but not the prediction of the decision itself. 
D) understand people's actions, but not what drives people to act in certain ways.

Question 2

One major consequence of the availability heuristic 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) 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) 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) 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 3

According to the concept of framing effects,

Accepted Answer

A) advertising power is limited because of the inability of firms to change consumers' perspectives. 
B) all people will assign the same utility to a given situation, regardless of their previous status quo. 
C) whether a new situation is viewed as a gain or a loss depends on one's starting position. 
D) firms should never raise prices or reduce wages. 
A) advertising power is limited because of the inability of firms to change consumers' perspectives. 
B) all people will assign the same utility to a given situation, regardless of their previous status quo. 
C) whether a new situation is viewed as a gain or a loss depends on one's starting position. 
D) firms should never raise prices or reduce wages.

Question 4

The dictator game

Accepted Answer

A) reveals nothing important about economic behavior because the money used is hypothetical. 
B) demonstrates that people care about fairness and will sacrifice financially for others. 
C) demonstrates nothing definitive about fairness, as concerns about the other player's perceptions will influence the dictator's choices. 
D) regularly results in the dictator taking all of the money for him/herself, as economic theory would predict. 
A) reveals nothing important about economic behavior because the money used is hypothetical. 
B) demonstrates that people care about fairness and will sacrifice financially for others. 
C) demonstrates nothing definitive about fairness, as concerns about the other player's perceptions will influence the dictator's choices. 
D) regularly results in the dictator taking all of the money for him/herself, as economic theory would predict.

Question 5

Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a neoclassical economist would expect Susie to

Accepted Answer

A) carefully weigh the short-term benefits against the long-term costs and make a rational decision about how many treats to eat. 
B) eat more sugary treats than is optimal, as she likely gives more weight to present events and outcomes than to ones in the future. 
C) give away most of her sugary treats in an effort to resist temptation. 
D) determine her fair share of the sugary treats available, and only eat those. 
A) carefully weigh the short-term benefits against the long-term costs and make a rational decision about how many treats to eat. 
B) eat more sugary treats than is optimal, as she likely gives more weight to present events and outcomes than to ones in the future. 
C) give away most of her sugary treats in an effort to resist temptation. 
D) determine her fair share of the sugary treats available, and only eat those.

Question 6

Prospect theory and the work of behavioral economists confirm that consumers are economically rational.

Accepted Answer

A) True 
 B)False

Question 7

The tendency of hard-core Democrats to believe that all of the policies of the Trump administration have been detrimental to the nation illustrates the

Accepted Answer

A) confirmation bias. 
B) framing effect. 
C) overconfidence effect. 
D) availability heuristic. 
A) confirmation bias. 
B) framing effect. 
C) overconfidence effect. 
D) availability heuristic.

Question 8

Whenever Josh goes to his favorite restaurant, he wants to buy tiramisu, his favorite dessert. Despite the fact that he would enjoy the flavor of the tiramisu the same amount every time, Josh only buys it when others are having dessert and never buys it if he would be the only one having dessert. Behavioral economists would say that Josh's decision is affected by

Accepted Answer

A) the availability heuristic. 
B) confirmation biases. 
C) framing effects. 
D) the self-serving bias. 
A) the availability heuristic. 
B) confirmation biases. 
C) framing effects. 
D) the self-serving bias.

Question 9

Tony ran a marathon in 4.5 hours; his performance last year on the same course was 4 hours. Stacey ran the same marathon in 4 hours; her previous time was 4.4 hours. According to behavioral economists, and based solely on the information given, we would expect

Accepted Answer

A) Tony to feel good about his performance, and Stacey to feel good about hers. 
B) Tony to feel bad about his performance, and Stacey to feel good about hers. 
C) Tony to feel bad about his performance, and Stacey to feel bad about hers. 
D) Tony to feel good about his performance, and Stacey to feel bad about hers. 
A) Tony to feel good about his performance, and Stacey to feel good about hers. 
B) Tony to feel bad about his performance, and Stacey to feel good about hers. 
C) Tony to feel bad about his performance, and Stacey to feel bad about hers. 
D) Tony to feel good about his performance, and Stacey to feel bad about hers.

Question 10

The human tendency to believe only those data that agree with one's preconceptions and ignore other data that contradict the preconceptions is called

Accepted Answer

A) confirmation bias. 
B) self-serving bias. 
C) overconfidence effect. 
D) availability heuristic. 
A) confirmation bias. 
B) self-serving bias. 
C) overconfidence effect. 
D) availability heuristic.

Question 11

The United Kingdom's Behavioral Insights Team substantially increased the amount of income tax collected each year by

Accepted Answer

A) printing frowning face emoticons on correspondence to delinquent payers. 
B) mailing letters to those who had not yet paid, telling them that their neighbors had paid. 
C) establishing an automatic payroll withdrawal system to collect taxes. 
D) sending delinquent payers pictures of poor children. 
A) printing frowning face emoticons on correspondence to delinquent payers. 
B) mailing letters to those who had not yet paid, telling them that their neighbors had paid. 
C) establishing an automatic payroll withdrawal system to collect taxes. 
D) sending delinquent payers pictures of poor children.

Question 12

When people often blame an "act of nature" or their colleagues for their plans going awry, they are illustrating the cognitive bias known as the overconfidence effect.

Accepted Answer

A) True 
 B)False

Question 13

Discuss prospect theory.

Accepted Answer

Prospect theory helps to explain many co

Question 14

Heuristics help people make faster, error-free decisions.

Accepted Answer

A) True 
 B)False

Question 15

Junior collects baseball cards. He owns one Felix Hernandez card that sells in most shops for $15. He is interested in buying a different Felix card that also sells for $15. According to behavioral economics,

Accepted Answer

A) Junior should value the two cards equally and be willing to trade one for the other. 
B) the availability heuristic will cause Junior to value more highly the card he doesn't have. 
C) the endowment effect would suggest that Junior would not be willing to trade the card he has for the card he doesn't have. 
D) prospect theory says he will buy the second card, as both have the potential to appreciate in value. 
A) Junior should value the two cards equally and be willing to trade one for the other. 
B) the availability heuristic will cause Junior to value more highly the card he doesn't have. 
C) the endowment effect would suggest that Junior would not be willing to trade the card he has for the card he doesn't have. 
D) prospect theory says he will buy the second card, as both have the potential to appreciate in value.

Question 16

In anonymous surveys, on average people rate themselves as "above average" with regard to characteristics such as intelligence, perceptiveness, and driving ability. According to behavioral economics, this contradictory result would most likely be caused by the

Accepted Answer

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

Question 17

When economists talk about a "new normal" in terms of conditions in the production and employment sectors, they are suggesting a change in people's perceptions influenced by the

Accepted Answer

A) hindsight bias. 
B) confirmation bias. 
C) availability heuristic. 
D) framing effect. 
A) hindsight bias. 
B) confirmation bias. 
C) availability heuristic. 
D) framing effect.

Question 18

Neoclassical and behavioral economics are generally viewed as complementary.

Accepted Answer

A) True 
 B)False

Question 19

Suppose Justine and Sarah are playing the dictator game. Justine is the dictator and has $150 to allocate. Based on repeated experiments of the dictator game, what amounts, on average, are Justine and Sarah most likely to receive?

Accepted Answer

A) $150 for Justine and $0 for Sarah. 
B) $87 for Justine and $63 for Sarah. 
C) $75 for Justine and $75 for Sarah. 
D) $0 for Justine and $150 for Sarah. 
A) $150 for Justine and $0 for Sarah. 
B) $87 for Justine and $63 for Sarah. 
C) $75 for Justine and $75 for Sarah. 
D) $0 for Justine and $150 for Sarah.

Question 20

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.

Exam 8: Behavioral Economics

Behavioral economists put significant emphasis on using models to

One major consequence of the availability heuristic is that

According to the concept of framing effects,

The dictator game

Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a neoclassical economist would expect Susie to

Prospect theory and the work of behavioral economists confirm that consumers are economically rational.

The tendency of hard-core Democrats to believe that all of the policies of the Trump administration have been detrimental to the nation illustrates the

Tony ran a marathon in 4.5 hours; his performance last year on the same course was 4 hours. Stacey ran the same marathon in 4 hours; her previous time was 4.4 hours. According to behavioral economists, and based solely on the information given, we would expect

The human tendency to believe only those data that agree with one's preconceptions and ignore other data that contradict the preconceptions is called

The United Kingdom's Behavioral Insights Team substantially increased the amount of income tax collected each year by

When people often blame an "act of nature" or their colleagues for their plans going awry, they are illustrating the cognitive bias known as the overconfidence effect.

Discuss prospect theory.

Heuristics help people make faster, error-free decisions.

Junior collects baseball cards. He owns one Felix Hernandez card that sells in most shops for $15. He is interested in buying a different Felix card that also sells for $15. According to behavioral economics,

In anonymous surveys, on average people rate themselves as "above average" with regard to characteristics such as intelligence, perceptiveness, and driving ability. According to behavioral economics, this contradictory result would most likely be caused by the

When economists talk about a "new normal" in terms of conditions in the production and employment sectors, they are suggesting a change in people's perceptions influenced by the

Neoclassical and behavioral economics are generally viewed as complementary.

Suppose Justine and Sarah are playing the dictator game. Justine is the dictator and has $150 to allocate. Based on repeated experiments of the dictator game, what amounts, on average, are Justine and Sarah most likely to receive?

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

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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