Question 1

Precommitments are a tool designed to overcome time inconsistency.

Accepted Answer

A) True 
 B)False

Question 2

According to behavioral economists, self-control problems generally result from poor information.

Accepted Answer

A) True 
 B)False

Question 3

Natural disasters often cause shortages of critical supplies.What outcomes would neoclassical and behavioral economics typically predict from these events?

Accepted Answer

A)  Both would expect prices to rise significantly, whether from market forces or from self-interest overwhelming any sense of compassion for others.
B)  Both would expect sellers to keep prices unchanged, whether to keep customers happy long-term or out of a sense of fairness.
C)  Neoclassical economists would expect economic chaos and collapse, while behavioral economists would expect everyone to act cooperatively.
D)  Neoclassical economists would expect prices to rise dramatically as a natural result of the greater scarcity, and behavioral economists would expect prices to increase less or not at all as people try not to take advantage of the situation.E) B) and D)
F) None of the above

Question 4

(Consider This)  Solar City helped homeowners overcome their myopia by

Accepted Answer

A)  providing improved information about the benefits of solar systems.
B)  framing the installation of solar systems against the environmental costs of nonrenewable energy sources.
C)  eliminating the upfront costs of solar systems.
D)  appealing to homeowners' sense of fairness with regard to environmental responsibility.E) B) and D)
F) A) and C)

Question 5

When people react to (or perceive)  identical situations differently in different contexts, we call that the

Accepted Answer

A)  planning fallacy.
B)  framing effect.
C)  confirmation bias.
D)  availability heuristic.E) A) and D)
F) A) and C)

Question 6

(Last Word)  The BIT helped poor people in the Philippines increase their saving by offering "commitment" savings accounts that restricted withdrawals until certain dates or savings targets were reached.This is an example of

Accepted Answer

A)  a nudge.
B)  anchoring.
C)  mental accounting.
D)  endowment effects.E) A) and B)
F) B) and D)

Question 7

Prospect theory explains the status-quo bias as a combination of loss aversion and the

Accepted Answer

A)  anchoring effect.
B)  mental accounting effect.
C)  endowment effect.
D)  confirmation bias.E) B) and C)
F) B) and D)

Question 8

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 biasE) All of the above
F) A) and B)

Question 9

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 10

Some people's tendency to believe that they are better than average at making judgments or opinions is called the

Accepted Answer

A)  confirmation bias.
B)  framing effect.
C)  overconfidence effect.
D)  self-serving bias.E) A) and C)
F) None of the above

Question 11

"Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.

Accepted Answer

A) True 
 B)False

Question 12

(Last Word)  The United Kingdom's Behavioral Insights Team substantially increased the amount of income tax collected each year by

Accepted Answer

A)  printing frowning face emoticons on correspondence to delinquent payers.
B)  mailing letters to those who had not yet paid, telling them that their neighbors had paid.
C)  establishing an automatic payroll withdrawal system to collect taxes.
D)  sending delinquent payers pictures of poor children.E) A) and D)
F) B) and D)

Question 13

System 1 is the part of the brain that carefully weighs the benefits and costs when making decisions.

Accepted Answer

A) True 
 B)False

Question 14

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.E) All of the above
F) A) and B)

Question 15

Self-control problems, say, among people on a diet, is caused by the cognitive bias known as time inconsistency.

Accepted Answer

A) True 
 B)False

Question 16

Behavioral economists believe that people

Accepted Answer

A)  assess current and future options equally well.
B)  do not care about fairness, especially if it impairs their ability to get what they want.
C)  make errors in decision making because of problems such as bad information, but such errors are random and generally not repeated by the same individual.
D)  often succumb to temptation.E) B) and D)
F) All of the above

Question 17

The "anchoring" phenomenon observed by behavioral economists refers to the fact that people's estimates of the value of things are affected by

Accepted Answer

A)  recently considered information.
B)  their childhood memories.
C)  irrelevant data always.
D)  relevant information solely.E) All of the above
F) None of the above

Question 18

The threat of rejection in market transactions

Accepted Answer

A)  leads to better products for consumers.
B)  leads to lower prices for consumers.
C)  leads to greater cooperation between buyers and sellers.
D)  does all of these.E) A) and B)
F) A) and D)

Question 19

The human tendency to believe only those data that agree with one's preconceptions and ignore other data that contradict the preconceptions is called

Accepted Answer

A)  confirmation bias.
B)  self-serving bias.
C)  overconfidence effect.
D)  availability heuristic.E) B) and C)
F) A) and C)

Question 20

Dan was certain that his upcoming economics test would be so easy that he could wait to study until the night before and still do well on the exam.When he cracked open his book and notes the night before the exam, he realized he should've started studying earlier.According to behavioral economics, Dan's error was caused primarily by

Accepted Answer

A)  a planning fallacy.
B)  an overconfidence effect.
C)  framing effects.
D)  hindsight bias.E) B) and C)
F) A) and B)

Exam 8: Behavioral Economics

"Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.

Correct Answer
verified

Precommitments are a tool designed to overcome time inconsistency.

Correct Answer
verified

Some people's tendency to believe that they are better than average at making judgments or opinions is called the

Correct Answer
verified

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

Correct Answer
verified

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?

Correct Answer
verified

(Last Word) The BIT helped poor people in the Philippines increase their saving by offering "commitment" savings accounts that restricted withdrawals until certain dates or savings targets were reached.This is an example of

Correct Answer
verified

Correct Answer
verified

Natural disasters often cause shortages of critical supplies.What outcomes would neoclassical and behavioral economics typically predict from these events?

Correct Answer
verified

The "anchoring" phenomenon observed by behavioral economists refers to the fact that people's estimates of the value of things are affected by

Correct Answer
verified

Behavioral economists believe that people

Correct Answer
verified

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."

Correct Answer
verified

According to behavioral economists, self-control problems generally result from poor information.

Correct Answer
verified

Prospect theory explains the status-quo bias as a combination of loss aversion and the

Correct Answer
verified

(Last Word) The United Kingdom's Behavioral Insights Team substantially increased the amount of income tax collected each year by

Correct Answer
verified

(Consider This) Solar City helped homeowners overcome their myopia by

Correct Answer
verified

The threat of rejection in market transactions

Correct Answer
verified

The human tendency to believe only those data that agree with one's preconceptions and ignore other data that contradict the preconceptions is called

Correct Answer
verified

System 1 is the part of the brain that carefully weighs the benefits and costs when making decisions.

Correct Answer
verified

Self-control problems, say, among people on a diet, is caused by the cognitive bias known as time inconsistency.

Correct Answer
verified

When people react to (or perceive) identical situations differently in different contexts, we call that the

Correct Answer
verified

Exam 8: Behavioral Economics

"Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.

Correct AnswerverifiedShow Answer

Precommitments are a tool designed to overcome time inconsistency.

Correct AnswerverifiedShow Answer

Some people's tendency to believe that they are better than average at making judgments or opinions is called the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

(Last Word) The BIT helped poor people in the Philippines increase their saving by offering "commitment" savings accounts that restricted withdrawals until certain dates or savings targets were reached.This is an example of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Natural disasters often cause shortages of critical supplies.What outcomes would neoclassical and behavioral economics typically predict from these events?

Correct AnswerverifiedShow Answer

The "anchoring" phenomenon observed by behavioral economists refers to the fact that people's estimates of the value of things are affected by

Correct AnswerverifiedShow Answer

Behavioral economists believe that people

Correct AnswerverifiedShow Answer

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."

Correct AnswerverifiedShow Answer

According to behavioral economists, self-control problems generally result from poor information.

Correct AnswerverifiedShow Answer

Prospect theory explains the status-quo bias as a combination of loss aversion and the

Correct AnswerverifiedShow Answer

(Last Word) The United Kingdom's Behavioral Insights Team substantially increased the amount of income tax collected each year by

Correct AnswerverifiedShow Answer

(Consider This) Solar City helped homeowners overcome their myopia by

Correct AnswerverifiedShow Answer

The threat of rejection in market transactions

Correct AnswerverifiedShow Answer

The human tendency to believe only those data that agree with one's preconceptions and ignore other data that contradict the preconceptions is called

Correct AnswerverifiedShow Answer

System 1 is the part of the brain that carefully weighs the benefits and costs when making decisions.

Correct AnswerverifiedShow Answer

Self-control problems, say, among people on a diet, is caused by the cognitive bias known as time inconsistency.

Correct AnswerverifiedShow Answer

When people react to (or perceive) identical situations differently in different contexts, we call that the

Correct AnswerverifiedShow Answer

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