Question 1

According to behavioral economics, temptation to make harmful decisions can be overcome by presenting decision makers with better information and more options.

Accepted Answer

A) True 
 B)False

Question 2

Framing effects may cause the same person to view the same new situation differently depending on whether that new situation makes him or her better or worse off.

Accepted Answer

A) True 
 B)False

Question 3

Salary smoothing, automatic payroll deductions, and early withdrawal penalties are all examples of

Accepted Answer

A) mechanisms imposed by companies to extract more from their workers and customers. 
B) policies that do not fundamentally alter decisions because they do not change the benefits or costs of an action. 
C) precommitments. 
D) hardwired heuristics. 
A) mechanisms imposed by companies to extract more from their workers and customers. 
B) policies that do not fundamentally alter decisions because they do not change the benefits or costs of an action. 
C) precommitments. 
D) hardwired heuristics.

Question 4

Which of the following assumptions about human behavior is most likely to be accepted by behavioral economists?

Accepted Answer

A) People have preferences that are unstable and vary by context. 
B) People are almost entirely self-interested in their behavior. 
C) People plan out decisions well and possess lots of willpower. 
D) People eagerly and accurately calculate the benefits and costs of their decisions. 
A) People have preferences that are unstable and vary by context. 
B) People are almost entirely self-interested in their behavior. 
C) People plan out decisions well and possess lots of willpower. 
D) People eagerly and accurately calculate the benefits and costs of their decisions.

Question 5

That most people would prefer to buy meat that is 80 percent lean rather than meat that is 20 percent fat is an illustration of the

Accepted Answer

A) anchoring effect. 
B) framing effect. 
C) confirmation bias. 
D) endowment effect. 
A) anchoring effect. 
B) framing effect. 
C) confirmation bias. 
D) endowment effect.

Question 6

One of the important contributions of behavioral economics is the focus on how people make decisions involving

Accepted Answer

A) goods and services. 
B) inputs and outputs. 
C) good things and bad things. 
D) prices and money. 
A) goods and services. 
B) inputs and outputs. 
C) good things and bad things. 
D) prices and money.

Question 7

Parker's shares of stock in ACME Corporation lost $200 in value, but his shares in XYZ, Inc. gained $500. 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 about the same. 
C) Parker would feel worse off. 
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 about the same. 
C) Parker would feel worse off. 
D) Behavioral economics research suggest that the intensity of losses versus gains follows no measurable pattern.

Question 8

Those who believe that "there is no such thing as bad publicity" base this argument on which of the following ideas from behavioral economics?

Accepted Answer

A) The recognition heuristic will overcome any negative emotional associations. 
B) The recognition heuristic will prevent people from incorporating negative information into their decision-making process. 
C) Framing effects will diminish the negative emotions associated with most bad publicity. 
D) Self-serving biases will make people "look the other way" and ignore bad publicity. 
A) The recognition heuristic will overcome any negative emotional associations. 
B) The recognition heuristic will prevent people from incorporating negative information into their decision-making process. 
C) Framing effects will diminish the negative emotions associated with most bad publicity. 
D) Self-serving biases will make people "look the other way" and ignore bad publicity.

Question 9

Behavioral economists suggest that the reason why many consumers tend to stick to one brand in things that they often buy, like food items, is people's 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 10

Which of the following is a key difference between the dictator game and the ultimatum game?

Accepted Answer

A) The dictator game is played with real money; the ultimatum game is played with hypothetical money. 
B) In the dictator game, one person has total control over the split; in the ultimatum game, both players have to agree to the split. 
C) Results of dictator game experiments reveal that people don't care about fairness; results of the ultimatum game indicate that they do care. 
D) There is no difference between them; they are simply different names for the same game. 
A) The dictator game is played with real money; the ultimatum game is played with hypothetical money. 
B) In the dictator game, one person has total control over the split; in the ultimatum game, both players have to agree to the split. 
C) Results of dictator game experiments reveal that people don't care about fairness; results of the ultimatum game indicate that they do care. 
D) There is no difference between them; they are simply different names for the same game.

Question 11

Time inconsistency refers to the persistent underestimation of how long a task will take to perform.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a significant difference in the behavior of the dictator/proposer between the dictator game and the ultimatum game?

Accepted Answer

A) The dictator/proposer tends to be more generous in the ultimatum game. 
B) The dictator/proposer tends to be more generous in the dictator game. 
C) There is no systematic difference in the generosity of the dictator/proposer between the two games. 
D) Dictators/proposers demonstrate more emotion when playing the dictator game. 
A) The dictator/proposer tends to be more generous in the ultimatum game. 
B) The dictator/proposer tends to be more generous in the dictator game. 
C) There is no systematic difference in the generosity of the dictator/proposer between the two games. 
D) Dictators/proposers demonstrate more emotion when playing the dictator game.

Question 13

Behavioral economists believe that people can be made better off by

Accepted Answer

A) giving them more options, just like the belief of neoclassical economists. 
B) giving them more options, contrary to the belief of neoclassical economists. 
C) getting them to select better from the same set of options as they had initially. 
D) requiring them to follow an externally determined best choice among their options. 
A) giving them more options, just like the belief of neoclassical economists. 
B) giving them more options, contrary to the belief of neoclassical economists. 
C) getting them to select better from the same set of options as they had initially. 
D) requiring them to follow an externally determined best choice among their options.

Question 14

One major point of disagreement between neoclassical economics and behavioral economics is the assumption of rationality.

Accepted Answer

A) True 
 B)False

Question 15

The endowment effect makes people value things less when they think of those things as their own as opposed to identical things that are not theirs-as in "the grass is greener on the other side."

Accepted Answer

A) True 
 B)False

Question 16

The low-energy mental shortcuts, or heuristics, that the human brain commonly employs is one major reason for the systematic errors in decision making that people make, which is the focus of behavioral economics.

Accepted Answer

A) True 
 B)False

Question 17

People's tendency to prefer something that will yield immediate benefits over something whose benefits come later is called what by behavioral economists?

Accepted Answer

A) myopia 
B) mental accounting 
C) anchoring 
D) framing 
A) myopia 
B) mental accounting 
C) anchoring 
D) framing

Question 18

The so-called Lake Wobegon effect, where everyone in a group claims to be above average, illustrates the

Accepted Answer

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

Question 19

The persistence of some "urban legends" and some myths is a reflection of the

Accepted Answer

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

Question 20

When ordinarily neat people tend to litter in areas that are covered with graffiti, they illustrate 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.

Exam 8: Behavioral Economics

According to behavioral economics, temptation to make harmful decisions can be overcome by presenting decision makers with better information and more options.

Framing effects may cause the same person to view the same new situation differently depending on whether that new situation makes him or her better or worse off.

Salary smoothing, automatic payroll deductions, and early withdrawal penalties are all examples of

Which of the following assumptions about human behavior is most likely to be accepted by behavioral economists?

That most people would prefer to buy meat that is 80 percent lean rather than meat that is 20 percent fat is an illustration of the

One of the important contributions of behavioral economics is the focus on how people make decisions involving

Parker's shares of stock in ACME Corporation lost $200 in value, but his shares in XYZ, Inc. gained $500. According to behavioral economics research, how would Parker feel as a result of these changes?

Those who believe that "there is no such thing as bad publicity" base this argument on which of the following ideas from behavioral economics?

Behavioral economists suggest that the reason why many consumers tend to stick to one brand in things that they often buy, like food items, is people's tendency to have the

Which of the following is a key difference between the dictator game and the ultimatum game?

Time inconsistency refers to the persistent underestimation of how long a task will take to perform.

Which of the following is a significant difference in the behavior of the dictator/proposer between the dictator game and the ultimatum game?

Behavioral economists believe that people can be made better off by

One major point of disagreement between neoclassical economics and behavioral economics is the assumption of rationality.

The endowment effect makes people value things less when they think of those things as their own as opposed to identical things that are not theirs-as in "the grass is greener on the other side."

The low-energy mental shortcuts, or heuristics, that the human brain commonly employs is one major reason for the systematic errors in decision making that people make, which is the focus of behavioral economics.

People's tendency to prefer something that will yield immediate benefits over something whose benefits come later is called what by behavioral economists?

The so-called Lake Wobegon effect, where everyone in a group claims to be above average, illustrates the

The persistence of some "urban legends" and some myths is a reflection of the

When ordinarily neat people tend to litter in areas that are covered with graffiti, they illustrate the

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