Question 1

In Minnesota, tax collectors found that threatening late filers with warnings and fines does not increase tax compliance. Instead, they publicized the fact that most Minnesotans had already filled in their returns. What type of nudge is this?

Accepted Answer

A)   An information nudge
B)   A pricing nudge
C)   An advantageous default option nudge
D)   There is no nudge involved.E) A) and B)
F) B) and D)

Question 2

Behavioral economists have found that:

Accepted Answer

A)   people are always irrational when considering incentives.
B)   markets are the best way to organize mutually beneficial exchanges.
C)   only market prices matter when people make decisions.
D)   design mechanisms must take social factors as well as price into account.E) C) and D)
F) A) and B) D

Question 3

The idea that a person wants to have a bigger house in order to outdo his or her neighbors is referred to as:

Accepted Answer

A)   enlightened self-interest.
B)   the incentive compatibility problem.
C)   luxury fever.
D)   irrational.E) A) and B)
F) C) and D)

Question 4

Focusing on how people actually behave is the main motivation behind ________ economics.

Accepted Answer

A)   traditional
B)   behavioral
C)   modern
D)   homeE) A) and B)
F) A) and C)

Question 5

In economics, the context in which decisions are presented is referred to as:

Accepted Answer

A)   self-confirming equilibrium.
B)   enlightened self-interest.
C)   choice architecture.
D)   shadow prices.E) All of the above
F) A) and B)

Question 6

A behavioral economist, in contrast to a traditional economist, would argue that one reason people have a hard time losing weight is that:

Accepted Answer

A)   people prefer to eat sweets and fatty foods and therefore are making an optimal choice.
B)   the cost of losing weight (exercising and eating less)  must be incurred now, whereas the benefit (being thinner)  isn't enjoyed till later.
C)   fatty and sweet foods cost more than healthy foods in general, and therefore people buy more sweet and fatty foods.
D)   we live in a sedentary society with little opportunity for rigorous exercise.E) C) and D)
F) A) and B)

Question 7

Which type of model can account for all types of allocating and coordinating mechanisms, even those without explicit money prices?

Accepted Answer

A)   Butterfly effect
B)   Path-dependent
C)   Expression
D)   Shadow priceE) A) and D)
F) None of the above

Question 8

When looking back on past choices, some people feel they should have exercised more and eaten less. The fact that they could not make that choice at that point in time is an example of less than optimal choices resulting from the:

Accepted Answer

A)   complicated nature of the choice.
B)   fact that the benefits and costs of choices are separated by time.
C)   fact that we don't make food and exercise choices very frequently. D. market system within which we make choices.
D)   market system within which we make choices.E) None of the above
F) A) and D) B

Question 9

Behavioral economists believe that people should smoke as many cigarettes as they want.

Accepted Answer

A) True 
 B)False

Question 10

Suppose the federal government passes laws that require banks to disclose the advantages of having their customers use automatic bill paying (an example of a RECAP policy) . This would be an example of a:

Accepted Answer

A)   push.
B)   nudge.
C)   shadow price.
D)   flawed assumption.E) None of the above
F) C) and D)

Question 11

An auction is an example of a coordination mechanism.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not a concern about nudge policies?

Accepted Answer

A)   Very few policies meet the criterion of libertarian paternalism.
B)   Designing helpful policies is complicated.
C)   It is unclear that government knows best.
D)   Nudge policy is not strong enough to have much of an effect.E) None of the above
F) A) and C)

Question 13

Only money prices affect incentives; shadow prices do not.

Accepted Answer

A) True 
 B)False

Question 14

A good that people buy only to make them look better than their neighbors is called a:

Accepted Answer

A)   show-off good.
B)   relative position good.
C)   conspicuous consumption good.
D)   McGood.E) C) and D)
F) A) and B)

Question 15

Grocery stores often place items people buy on impulse at the checkout lane. This is an example of:

Accepted Answer

A)   choice architecture.
B)   government intervention.
C)   price fixing.
D)   irrational behavior.E) B) and C)
F) A) and B)

Question 16

Traditional economics argues that people know what they want better than anyone else, and this justifies the traditionalists' concentration on maximizing people's consumption.

Accepted Answer

A) True 
 B)False

Question 17

Suppose the cafeteria at a university puts healthy foods such as fruit and yogurt in an easily accessible location but places junk foods somewhere slightly less prominent. This would be an example of a(n) :

Accepted Answer

A)   push.
B)   irrational behavior.
C)   nudge.
D)   incentive compatibility problem.E) A) and B)
F) C) and D) C

Question 18

Paternalism leads people to:

Accepted Answer

A)   make decisions that are good for themselves that they might not have made on their own.
B)   consider what their parents would do when making decisions even though they themselves might not make those same decisions.
C)   buy only what they need instead of what they want because doing otherwise is bad environmental stewardship.
D)   use their abilities as well as possible and purchase only what they need regardless of price.E) None of the above
F) B) and C)

Question 19

Economic engineering:

Accepted Answer

A)   focuses exclusively on social factors that affect incentives.
B)   is the process of designing markets and coordinating mechanisms to achieve a specific goal.
C)   simulates virtual economies on the computer and lets coordination mechanisms emerge.
D)   is a scientific approach to economics in contrast to the heuristic supply/demand model.E) A) and D)
F) B) and C)

Question 20

Requiring people to opt out of organ donation when getting a driver's license is an example of a(n) :

Accepted Answer

A)   pricing nudge.
B)   encouragement nudge.
C)   information nudge.
D)   advantageous default option nudge.E) A) and C)
F) A) and B)

Exam 22: Behavioral Economics and Modern Economic Policy

In Minnesota, tax collectors found that threatening late filers with warnings and fines does not increase tax compliance. Instead, they publicized the fact that most Minnesotans had already filled in their returns. What type of nudge is this?

Correct AnswerverifiedShow Answer

Behavioral economists have found that:

Correct AnswerverifiedD

The idea that a person wants to have a bigger house in order to outdo his or her neighbors is referred to as:

Correct AnswerverifiedShow Answer

Focusing on how people actually behave is the main motivation behind ________ economics.

Correct AnswerverifiedShow Answer

In economics, the context in which decisions are presented is referred to as:

Correct AnswerverifiedShow Answer

A behavioral economist, in contrast to a traditional economist, would argue that one reason people have a hard time losing weight is that:

Correct AnswerverifiedShow Answer

Which type of model can account for all types of allocating and coordinating mechanisms, even those without explicit money prices?

Correct AnswerverifiedShow Answer

When looking back on past choices, some people feel they should have exercised more and eaten less. The fact that they could not make that choice at that point in time is an example of less than optimal choices resulting from the:

Correct AnswerverifiedB

Behavioral economists believe that people should smoke as many cigarettes as they want.

Correct AnswerverifiedShow Answer

Suppose the federal government passes laws that require banks to disclose the advantages of having their customers use automatic bill paying (an example of a RECAP policy) . This would be an example of a:

Correct AnswerverifiedShow Answer

An auction is an example of a coordination mechanism.

Correct AnswerverifiedShow Answer

Which of the following is not a concern about nudge policies?

Correct AnswerverifiedShow Answer

Only money prices affect incentives; shadow prices do not.

Correct AnswerverifiedShow Answer

A good that people buy only to make them look better than their neighbors is called a:

Correct AnswerverifiedShow Answer

Grocery stores often place items people buy on impulse at the checkout lane. This is an example of:

Correct AnswerverifiedShow Answer

Traditional economics argues that people know what they want better than anyone else, and this justifies the traditionalists' concentration on maximizing people's consumption.

Correct AnswerverifiedShow Answer

Suppose the cafeteria at a university puts healthy foods such as fruit and yogurt in an easily accessible location but places junk foods somewhere slightly less prominent. This would be an example of a(n) :

Correct AnswerverifiedC

Paternalism leads people to:

Correct AnswerverifiedShow Answer

Economic engineering:

Correct AnswerverifiedShow Answer

Requiring people to opt out of organ donation when getting a driver's license is an example of a(n) :

Correct AnswerverifiedShow Answer

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D

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B

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C

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