Question 1

Neoclassical economics assumes that people have the following characteristics, except

Accepted Answer

A)  they are stable and definite in their tastes and preferences. 
B)  they are as good at assessing future options as they are in assessing current ones. 
C)  they are driven by their pursuit of maximum satisfaction. 
D)  they care deeply about fairness and are often generous. 
A)  they are stable and definite in their tastes and preferences. 
B)  they are as good at assessing future options as they are in assessing current ones. 
C)  they are driven by their pursuit of maximum satisfaction. 
D)  they care deeply about fairness and are often generous.

Question 2

The dictator game and ultimatum game are experiments that have provided field evidence for

Accepted Answer

A)  the invisible hand. 
B)  fairness. 
C)  self-interest. 
D)  cognitive biases. 
A)  the invisible hand. 
B)  fairness. 
C)  self-interest. 
D)  cognitive biases.

Question 3

A central focus of prospect theory is

Accepted Answer

A)  how people deal with "bads," as well as how they deal with "goods." 
B)  optimizing precious metal discovery and extraction. 
C)  maximizing returns from investment portfolios. 
D)  how people make rational decisions despite having incomplete information. 
A)  how people deal with "bads," as well as how they deal with "goods." 
B)  optimizing precious metal discovery and extraction. 
C)  maximizing returns from investment portfolios. 
D)  how people make rational decisions despite having incomplete information.

Question 4

Which of the following best describes the relationship between market transactions and the ultimatum and dictator games?

Accepted Answer

A)  Market transactions operate more like the ultimatum game than the dictator game. 
B)  Market transactions operate more like the dictator game than the ultimatum game. 
C)  The ultimatum and dictator games both provide good representations of how market transactions work. 
D)  Neither the ultimatum game nor the dictator game bears much similarity to market transactions. 
A)  Market transactions operate more like the ultimatum game than the dictator game. 
B)  Market transactions operate more like the dictator game than the ultimatum game. 
C)  The ultimatum and dictator games both provide good representations of how market transactions work. 
D)  Neither the ultimatum game nor the dictator game bears much similarity to market transactions.

Question 5

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 6

For economists, "myopia" refers to

Accepted Answer

A)  visual nearsightedness. 
B)  people's difficulty in conceptualizing the future. 
C)  people's tendency to put too much emphasis on the future and ignore important present concerns. 
D)  people's tendency to focus on microeconomic concerns because of an inability to conceptualize macroeconomics. 
A)  visual nearsightedness. 
B)  people's difficulty in conceptualizing the future. 
C)  people's tendency to put too much emphasis on the future and ignore important present concerns. 
D)  people's tendency to focus on microeconomic concerns because of an inability to conceptualize macroeconomics.

Question 7

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 8

Carlos and Darla are playing the dictator game. Carlos is assigned the role of dictator and given $20 to split between the two of them. Based on previous experiments with this game by behavioral economists, which is the least likely outcome?

Accepted Answer

A)  Carlos will keep all of the money for himself. 
B)  Carlos will give all of the money to Darla. 
C)  Carlos will split the money evenly with Darla. 
D)  Carlos will split the money, keeping a little more than half for himself. 
A)  Carlos will keep all of the money for himself. 
B)  Carlos will give all of the money to Darla. 
C)  Carlos will split the money evenly with Darla. 
D)  Carlos will split the money, keeping a little more than half for himself.

Question 9

Fred just purchased an expensive new refrigerator and is considering purchasing the overpriced warranty. In making his decision on the warranty, Fred ignores better ways that his money could be spent, including paying off high-interest credit card debt. According to prospect theory, the process that leads Fred to ignore the debt and buy the overpriced warranty is

Accepted Answer

A)  framing bias. 
B)  anchoring. 
C)  mental accounting. 
D)  confirmation bias. 
A)  framing bias. 
B)  anchoring. 
C)  mental accounting. 
D)  confirmation bias.

Question 10

When people convince themselves that they "knew all along" what was going to happen, when in fact their predictions were incorrect, they suffer from

Accepted Answer

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

Question 11

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 12

Which of the following statements is most accurate about human brain modularity?

Accepted Answer

A)  System 1 uses heuristics, while system 2 is more calculating; both are equally important in decision making. 
B)  Both systems regularly use both heuristics and conscious calculations; both are equally important in decision making. 
C)  System 1 uses heuristics, while system 2 is more calculating; system 2 regularly overcomes system 1's heuristics to make decisions. 
D)  System 1 uses heuristics, while system 2 is more calculating; most decisions are made by system 1. 
A)  System 1 uses heuristics, while system 2 is more calculating; both are equally important in decision making. 
B)  Both systems regularly use both heuristics and conscious calculations; both are equally important in decision making. 
C)  System 1 uses heuristics, while system 2 is more calculating; system 2 regularly overcomes system 1's heuristics to make decisions. 
D)  System 1 uses heuristics, while system 2 is more calculating; most decisions are made by system 1.

Question 13

High-end retailers spend a lot on architecture, displays, and packaging in order to take advantage of 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 14

Which of the following individuals least likely suffers from myopia?

Accepted Answer

A)  Marilyn, who struggles to lose weight because she regularly cheats on her diet. 
B)  Myrna, who lived through the Great Depression and tends to spend frugally and save most of her money. 
C)  Malcolm, who currently spends all his income and saves nothing for retirement. 
D)  Marvin, who regularly sleeps in and is constantly late for work, much to the chagrin of his boss. 
A)  Marilyn, who struggles to lose weight because she regularly cheats on her diet. 
B)  Myrna, who lived through the Great Depression and tends to spend frugally and save most of her money. 
C)  Malcolm, who currently spends all his income and saves nothing for retirement. 
D)  Marvin, who regularly sleeps in and is constantly late for work, much to the chagrin of his boss.

Question 15

When people change their decision just because the context of the given information is changed, we call that the "framing effect."

Accepted Answer

A) True 
 B)False

Question 16

Which of the following cognitive biases refers to people's tendency to attribute their successes to personal ability and effort, and failures to forces outside their control?

Accepted Answer

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

Question 17

"Nudging" is the term used to refer to making people make better choices for themselves, using lessons about human behavior which economists have learned from

Accepted Answer

A)  neoclassical theory. 
B)  purely competitive markets. 
C)  marginal analysis. 
D)  behavioral economics. 
A)  neoclassical theory. 
B)  purely competitive markets. 
C)  marginal analysis. 
D)  behavioral economics.

Question 18

The self-serving bias causes people to act only in their self-interest.

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

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

Exam 8: Behavioral Economics

Neoclassical economics assumes that people have the following characteristics, except

The dictator game and ultimatum game are experiments that have provided field evidence for

A central focus of prospect theory is

Which of the following best describes the relationship between market transactions and the ultimatum and dictator games?

One important consequence of the self-serving bias is that

For economists, "myopia" refers to

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

Carlos and Darla are playing the dictator game. Carlos is assigned the role of dictator and given $20 to split between the two of them. Based on previous experiments with this game by behavioral economists, which is the least likely outcome?

When people convince themselves that they "knew all along" what was going to happen, when in fact their predictions were incorrect, they suffer from

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

Which of the following statements is most accurate about human brain modularity?

High-end retailers spend a lot on architecture, displays, and packaging in order to take advantage of the

Which of the following individuals least likely suffers from myopia?

When people change their decision just because the context of the given information is changed, we call that the "framing effect."

Which of the following cognitive biases refers to people's tendency to attribute their successes to personal ability and effort, and failures to forces outside their control?

"Nudging" is the term used to refer to making people make better choices for themselves, using lessons about human behavior which economists have learned from

The self-serving bias causes people to act only in their self-interest.

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

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.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role 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