Exam 31:Behavioral Economics-Part A

In an experiment on risk aversion and inconsistency,a group of people were given the following choice: A)Lose $100 with certainty,or B)50% chance to win $50,50% chance to lose $200.Which of the following scenarios is most accurate and would most likely occur?

If a coin is tossed,and the results are 6 consecutive tails (TTTTTT),this is conclusive evidence that the coin is not a fair coin.

In the movie The Hunt for Red October,Captain Ramius (Sean Connery)leaves a letter for the Soviet Navy announcing that he intends to defect to the United States.As a result,the Soviet Navy launches a massive effort to find and sink Ramius's ship,the Red October.In announcing that he was intending to defect,Capt.Ramius's actions could be explained as

In a study of individually held stock portfolios over time,gains were much more likely to be realized than losses.Fifteen percent of all gains were realized in the time period,while only 10% of losses were.Subsequently,the rising stocks that were sold outperformed the losing stocks that were held.Behavioral economists would explain this as

A house was for sale for 9 months with no offers at $350,000.It was taken off the market,and relisted 1 month later at $399,500 and sold in 2 weeks.Which of the following behavioral economic concepts could explain this scenario?

Under hyperbolic discounting,a person discounts the long term future more heavily than the near term future.

In a study by financial economists Brad Barber and Terrance Odeank of stock portfolio management techniques and returns,men trade more frequently on average than women,and as a result of more active management,men's portfolios grow at a higher rate of return than women's.

A couple planning to get married wants to do all that they can to make their marriage last.To help,they should consider having

If Fred were to consume $1,050 1 year from now,he would consider this as good as spending $1,000 today.He would consider $1,628.89 of consumption 10 years into the future equivalent to $1,000 of consumption today.If the interest rate is 5%,Fred preferences

With several additional mutations,the bird flu,whose victims to date are mostly poultry,could become a global epidemic.Suppose there are 2 possible courses of action public health officials could take.For treatment A,the lives of 1 million people out of the 10 million affected would be saved.For treatment B,90% of those infected would not be helped and would die.If infected persons were given a choice between treatments A and B,which of the following scenarios would most likely occur?

In an experiment on risk aversion,a group of people were given the following choice: A)Lose $100 with certainty,or B)50% chance to win $50,50% chance to lose $200.An overwhelming majority chose option B.This can be best explained by which of the following?

According to a recent New York Times article,"Bank of America debit card customers can agree in advance to round up their purchases to the next dollar,putting the extra cents into a savings account." Why might customers want to commit to this mechanism rather than make deposits to their savings accounts on their own?

According to behavioral economists,rational consumers are able to make decisions when faced with many choices because preferences are complete.

Professor Bob has an incredibly messy office,and really wants to change but just can't.Professor Bob just read his first book about behavioral economics.To help him keep his office more neat,Professor Bob could hire

People find it easier to commit to saving for retirement from next year's salary as opposed to current salary.This behavior is consistent with hyperbolic discounting of income.

Which of the following are examples of the framing effect?

Deb plans and prepares her meals 1 month in advance.Scott eats out for lunch every day.According to observations from behavioral economics,Scott will eat more varied meals than Deb.

A new DVD of lectures on the topic of macro economics and personal hygiene is being marketed on the Internet as a remedy for insomnia.As an experiment,the marketing firm wants to direct half of Web hits to a page that advertises the DVD as 90% successful in inducing sleep while the other half are directed to a page that advertises the DVD as failing to induce sleep 10% of the time.Would you expect equal numbers of sales from the 2 advertising approaches? Explain.

In the 1960s dark comedy classic Dr.Strangelove,the Soviet Union constructs a Doomsday Machine that will destroy all life on earth automatically if the Soviet Union is attacked.The Doomsday Machine can never be turned off or disabled.Which of the following would best explain why the Soviets would build the Doomsday Machine?

Nash equilibria can be used to make predictions about human behavior in noncooperative games.Behavioral game theory studies actual human interaction,and has found inconsistencies between observed human behavior and Nash-predicted behavior.Which of the following is NOT an inconsistency pointed out by behavioral economists?