Question 1

Results of the dictator and ultimatum games reveal that people act in equally self-interested ways,regardless of the context or rules of the game.

Accepted Answer

A) True 
 B)False  False

Question 2

(Consider This)According to the piece "Wannamaker's Lament," how have firms responded to the evidence that most advertising campaigns have little impact on sales?

Accepted Answer

A)  Firms have substantially cut their advertising budgets to focus more on product quality. 
B)  Firms have substantially increased their advertising budgets in order to hit the spending threshold necessary to impact sales. 
C)  Firms have substantially cut their advertising budgets to focus more on new product development. 
D)  Firms have conducted a lot of simple experiments to determine what might increase sales. 
A)  Firms have substantially cut their advertising budgets to focus more on product quality. 
B)  Firms have substantially increased their advertising budgets in order to hit the spending threshold necessary to impact sales. 
C)  Firms have substantially cut their advertising budgets to focus more on new product development. 
D)  Firms have conducted a lot of simple experiments to determine what might increase sales. D

Question 3

Which of the following is not an implication of hardwired heuristics?

Accepted Answer

A)  Getting people to make positive behavioral changes is about putting them in situations where heuristics kick in and lead them to the desired outcome. 
B)  Getting people to make better decisions is simply a matter of providing more information and more options. 
C)  People who know and understand hardwired tendencies of others can take advantage of situations. 
D)  Even when confronted with irrefutable information that a behavior is detrimental,people still may not change what they're doing. 
A)  Getting people to make positive behavioral changes is about putting them in situations where heuristics kick in and lead them to the desired outcome. 
B)  Getting people to make better decisions is simply a matter of providing more information and more options. 
C)  People who know and understand hardwired tendencies of others can take advantage of situations. 
D)  Even when confronted with irrefutable information that a behavior is detrimental,people still may not change what they're doing. B

Question 4

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 5

When Lucian starts his new job,he is given the option to contribute to his retirement fund,which the company will match up to 5 percent of his base salary.Lucian knows he can afford to contribute to his retirement fund;he only needs to file a form to activate the contributions and matching.According to prospect theory,if Lucian is typical in his behavior,we would expect him to:

Accepted Answer

A)  take full advantage of the matching contribution because that would maximize his financial well-being. 
B)  not file the form to start the contribution and match. 
C)  negotiate with his boss for a higher match in order to increase his returns. 
D)  only start contributions if the retirement portfolio is heavily weighted in high-return assets. 
A)  take full advantage of the matching contribution because that would maximize his financial well-being. 
B)  not file the form to start the contribution and match. 
C)  negotiate with his boss for a higher match in order to increase his returns. 
D)  only start contributions if the retirement portfolio is heavily weighted in high-return assets.

Question 6

What do neoclassical economics and behavioral economics believe about giving people options?

Accepted Answer

A)  Both believe that people make better decisions when they are given a greater set of options. 
B)  Behavioral economics focuses on providing more options;neoclassical economics focuses on helping people make more rational decisions with the options available. 
C)  Neoclassical economics focuses on providing more options;behavioral economics focuses on helping people make better decisions with the options available. 
D)  Both believe that people are better off with fewer options,allowing them to spend more time calculating the benefits and costs of each available option. 
A)  Both believe that people make better decisions when they are given a greater set of options. 
B)  Behavioral economics focuses on providing more options;neoclassical economics focuses on helping people make more rational decisions with the options available. 
C)  Neoclassical economics focuses on providing more options;behavioral economics focuses on helping people make better decisions with the options available. 
D)  Both believe that people are better off with fewer options,allowing them to spend more time calculating the benefits and costs of each available option.

Question 7

Precommitments must impose costs on people to be effective.

Accepted Answer

A) True 
 B)False

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

People who engage in mental accounting are more likely to purchase overpriced warranties.

Accepted Answer

A) True 
 B)False

Question 10

According to behavioral economists,giving to charity:

Accepted Answer

A)  contradicts the view that people are narrowly self-interested. 
B)  appears unselfish but in fact is driven by self-interest. 
C)  results from an ability to accurately calculate benefits and costs. 
D)  is done solely to receive the utility from public recognition. 
A)  contradicts the view that people are narrowly self-interested. 
B)  appears unselfish but in fact is driven by self-interest. 
C)  results from an ability to accurately calculate benefits and costs. 
D)  is done solely to receive the utility from public recognition.

Question 11

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 12

In the face of rising costs,some firms reduce the quality of the goods they produce rather than maintain quality and increase prices.How would behavioral economics explain this strategy?

Accepted Answer

A)  People have an aversion to losses,and consumers are more likely to feel the loss of a price increase than a quality reduction. 
B)  Consumers are more tolerant of diminished quality because diminishing marginal utility causes people to get rid of goods sooner than in the past. 
C)  Firms are myopic in their decision making,with little regard for future profitability. 
D)  The availability heuristic will cause people to buy whatever is offered,regardless of the quality. 
A)  People have an aversion to losses,and consumers are more likely to feel the loss of a price increase than a quality reduction. 
B)  Consumers are more tolerant of diminished quality because diminishing marginal utility causes people to get rid of goods sooner than in the past. 
C)  Firms are myopic in their decision making,with little regard for future profitability. 
D)  The availability heuristic will cause people to buy whatever is offered,regardless of the quality.

Question 13

Neoclassical economics and behavioral economics:

Accepted Answer

A)  are generally viewed as complementary,together providing better understanding of economic behavior than each could on its own. 
B)  are diametrically opposed to each other. 
C)  generally address different issues in economics,and therefore rarely intersect on the same topic. 
D)  both start from the premise that people are fundamentally rational in their decision making. 
A)  are generally viewed as complementary,together providing better understanding of economic behavior than each could on its own. 
B)  are diametrically opposed to each other. 
C)  generally address different issues in economics,and therefore rarely intersect on the same topic. 
D)  both start from the premise that people are fundamentally rational in their decision making.

Question 14

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 15

According to prospect theory,firms are more likely to shrink packages than raise prices because:

Accepted Answer

A)  consumers feel the loss of a price increase more than they feel the loss of buying a smaller package for their money. 
B)  they don't understand that consumers recognize price increases easily,regardless of what form they take. 
C)  consumers associate smaller packages with higher quality luxury goods. 
D)  consumers are generally trying to downsize their purchases and lead simpler lives. 
A)  consumers feel the loss of a price increase more than they feel the loss of buying a smaller package for their money. 
B)  they don't understand that consumers recognize price increases easily,regardless of what form they take. 
C)  consumers associate smaller packages with higher quality luxury goods. 
D)  consumers are generally trying to downsize their purchases and lead simpler lives.

Question 16

Behavioral economists believe that while people try to make rational decisions,they are frequently subject to systematic errors.

Accepted Answer

A) True 
 B)False

Question 17

Both neoclassical and behavioral economics believe that people are mostly rational in both their decision making and their actions.

Accepted Answer

A) True 
 B)False

Question 18

According to behavioral economics:

Accepted Answer

A)  gains are felt more intensely than losses. 
B)  each successive unit of loss is equal in its marginal disutility. 
C)  each successive unit of loss hurts,but less than the previous unit. 
D)  each successive unit of loss hurts,and more than the previous unit. 
A)  gains are felt more intensely than losses. 
B)  each successive unit of loss is equal in its marginal disutility. 
C)  each successive unit of loss hurts,but less than the previous unit. 
D)  each successive unit of loss hurts,and more than the previous unit.

Question 19

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 20

Behavioral economics observes that people generally do not act according to their self-interest.

Accepted Answer

A) True 
 B)False

Results of the dictator and ultimatum games reveal that people act in equally self-interested ways,regardless of the context or rules of the game.

(Consider This)According to the piece "Wannamaker's Lament," how have firms responded to the evidence that most advertising campaigns have little impact on sales?

Which of the following is not an implication of hardwired heuristics?

According to behavioral economists,precommitments:

What do neoclassical economics and behavioral economics believe about giving people options?

Precommitments must impose costs on people to be effective.

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?

People who engage in mental accounting are more likely to purchase overpriced warranties.

According to behavioral economists,giving to charity:

According to the concept of framing effects:

In the face of rising costs,some firms reduce the quality of the goods they produce rather than maintain quality and increase prices.How would behavioral economics explain this strategy?

Neoclassical economics and behavioral economics:

According to behavioral economists,self-control problems:

According to prospect theory,firms are more likely to shrink packages than raise prices because:

Behavioral economists believe that while people try to make rational decisions,they are frequently subject to systematic errors.

Both neoclassical and behavioral economics believe that people are mostly rational in both their decision making and their actions.

According to behavioral economics:

The dictator game:

Behavioral economics observes that people generally do not act according to their self-interest.

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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

Filters

Exam 8: Behavioral Economics

Results of the dictator and ultimatum games reveal that people act in equally self-interested ways,regardless of the context or rules of the game.

(Consider This)According to the piece "Wannamaker's Lament," how have firms responded to the evidence that most advertising campaigns have little impact on sales?

Which of the following is not an implication of hardwired heuristics?

According to behavioral economists,precommitments:

What do neoclassical economics and behavioral economics believe about giving people options?

Precommitments must impose costs on people to be effective.

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?

People who engage in mental accounting are more likely to purchase overpriced warranties.

According to behavioral economists,giving to charity:

According to the concept of framing effects:

In the face of rising costs,some firms reduce the quality of the goods they produce rather than maintain quality and increase prices.How would behavioral economics explain this strategy?

Neoclassical economics and behavioral economics:

According to behavioral economists,self-control problems:

According to prospect theory,firms are more likely to shrink packages than raise prices because:

Behavioral economists believe that while people try to make rational decisions,they are frequently subject to systematic errors.

Both neoclassical and behavioral economics believe that people are mostly rational in both their decision making and their actions.

According to behavioral economics:

The dictator game:

Behavioral economics observes that people generally do not act according to their self-interest.

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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

Filters