Question 1

Al regularly pays the full amount of taxes due, even though he could easily hide some of his income and reduce his tax burden, with no risk of getting caught.According to behavioral economics,

Accepted Answer

A)  Al is not economically rational in his behavior.
B)  fairness and other moral considerations cause Al to act contrary to his pure self-interest.
C)  Al is more ethical than the majority of the population.
D)  heuristics are causing Al to act honorably, not a conscious or deliberative thought process.E) C) and D)
F) A) and D)

Question 2

Regarding people's preferences, behavioral economists observe that these preferences are

Accepted Answer

A)  stable and not affected by context.
B)  fluid and easily influenced by framing.
C)  readily and accurately predictable.
D)  consistent from one period to the next.E) B) and C)
F) A) and D)

Question 3

Time inconsistency refers to the phenomenon where your present self misjudges what your future self will do.

Accepted Answer

A) True 
 B)False

Question 4

Neoclassical economics assumes the following as major motivators of decisions and actions, except

Accepted Answer

A)  utility maximization.
B)  loss minimization.
C)  sense of fairness.
D)  self-interest.E) A) and D)
F) C) and D)

Question 5

Which of the following do behavioral economists blame for why many households in sunny areas resist solar panels because they focus on the upfront installation costs instead of the larger long-run benefits that accrue from the solar panels?

Accepted Answer

A)  framing effects
B)  anchoring
C)  myopia
D)  time InconsistencyE) B) and D)
F) A) and C)

Question 6

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, if Carlos is a typical player, behavioral economists would expect

Accepted Answer

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

Question 7

The endowment effect describes when people value a good more when they own it than when they don't.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following supermarket strategies to increase sales would be most consistent with a neoclassical economics (versus behavioral economics)  approach?

Accepted Answer

A)  holding posted prices constant but reducing package sizes
B)  providing discounts for buying in bulk
C)  placing the most frequently purchased items at the back of the store
D)  positioning high-profit kids cereals on the lower shelves of the cereal aisleE) B) and C)
F) A) and D)

Question 9

According to behavioral economics, cognitive biases

Accepted Answer

A)  create errors in decision making, but these errors are random and follow no particular pattern.
B)  occur but are not prevalent enough to distort the behavioral predictions of neoclassical economics.
C)  are misunderstandings or misperceptions that cause systematic error.
D)  are solely the result of faulty heuristics.E) None of the above
F) A) and B)

Question 10

Sellers' sense of fairness is always consistent with the notion of rational self-interest of neoclassical economics.

Accepted Answer

A) True 
 B)False

Question 11

The tendency of hard-core Republicans to believe that all of the economic developments under the Obama presidency have been detrimental to the nation illustrates the

Accepted Answer

A)  confirmation bias.
B)  framing effect.
C)  overconfidence effect.
D)  availability heuristic.E) A) and B)
F) All of the above

Question 12

The anchoring effect suggests that when people are made to think of large abstract numbers before they go shopping, many of them will subsequently be willing to pay higher prices for stuff.

Accepted Answer

A) True 
 B)False

Question 13

The many quirky decisions that people often make, which behavioral economics have found and analyzed, are so ingrained in the human psyche that there is nothing that policymakers can do about helping people make better choices for themselves.

Accepted Answer

A) True 
 B)False

Question 14

(Consider This)  According to the piece "Wannamaker's Lament,"

Accepted Answer

A)  price tags are inefficient signaling mechanisms.
B)  money-back guarantees are costly to firms because they don't increase sales but do increase costs.
C)  most marketing efforts have little impact on sales.
D)  only 50 percent of new consumer products fail within the first year.E) B) and D)
F) A) and C)

Question 15

Neoclassical economic analysis tends to disregard the following motivations in people's decisions and actions, except

Accepted Answer

A)  charity.
B)  selflessness.
C)  self-interest.
D)  focus on the common good.E) None of the above
F) A) and B)

Question 16

According to behavioral economists, the human brain frequently employs heuristics because

Accepted Answer

A)  people have consciously trained their brains to do so.
B)  these shortcuts minimize errors in decision making.
C)  they produce more optimal outcomes than do rational calculations of benefits and costs.
D)  they save energy and time in decision making.Gradable: automaticE) None of the above
F) A) and B)

Question 17

Many economists believe that the neoclassical theories of human behavior and the insights being accumulated in behavioral economics are basically

Accepted Answer

A)  opposed to one another.
B)  mutually exclusive to one another.
C)  complementary to one another.
D)  in agreement with one another.E) A) and B)
F) A) and C)

Question 18

Heuristics generally help people to make decisions faster, but also to make more err ors.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

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

Question 20

Which of the following supermarket strategies to increase sales would be most consistent with a behavioral economics (versus neoclassical economics)  approach?

Accepted Answer

A)  distributing online coupons
B)  providing discounts for buying in bulk
C)  positioning frequently purchased items at the back of the store
D)  offering price matching with other storesE) B) and D)
F) B) and C)

Exam 8: Behavioral Economics

According to behavioral economics, cognitive biases

Correct AnswerverifiedShow Answer

The many quirky decisions that people often make, which behavioral economics have found and analyzed, are so ingrained in the human psyche that there is nothing that policymakers can do about helping people make better choices for themselves.

Correct AnswerverifiedShow Answer

Many economists believe that the neoclassical theories of human behavior and the insights being accumulated in behavioral economics are basically

Correct AnswerverifiedShow Answer

Al regularly pays the full amount of taxes due, even though he could easily hide some of his income and reduce his tax burden, with no risk of getting caught.According to behavioral economics,

Correct AnswerverifiedShow Answer

Heuristics generally help people to make decisions faster, but also to make more err ors.

Correct AnswerverifiedShow Answer

Sellers' sense of fairness is always consistent with the notion of rational self-interest of neoclassical economics.

Correct AnswerverifiedShow Answer

Regarding people's preferences, behavioral economists observe that these preferences are

Correct AnswerverifiedShow Answer

Which of the following do behavioral economists blame for why many households in sunny areas resist solar panels because they focus on the upfront installation costs instead of the larger long-run benefits that accrue from the solar panels?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

(Consider This) According to the piece "Wannamaker's Lament,"

Correct AnswerverifiedShow Answer

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, if Carlos is a typical player, behavioral economists would expect

Correct AnswerverifiedShow Answer

The anchoring effect suggests that when people are made to think of large abstract numbers before they go shopping, many of them will subsequently be willing to pay higher prices for stuff.

Correct AnswerverifiedShow Answer

The tendency of hard-core Republicans to believe that all of the economic developments under the Obama presidency have been detrimental to the nation illustrates the

Correct AnswerverifiedShow Answer

Neoclassical economic analysis tends to disregard the following motivations in people's decisions and actions, except

Correct AnswerverifiedShow Answer

Which of the following supermarket strategies to increase sales would be most consistent with a behavioral economics (versus neoclassical economics) approach?

Correct AnswerverifiedShow Answer

Neoclassical economics assumes the following as major motivators of decisions and actions, except

Correct AnswerverifiedShow Answer

Which of the following supermarket strategies to increase sales would be most consistent with a neoclassical economics (versus behavioral economics) approach?

Correct AnswerverifiedShow Answer

According to behavioral economists, the human brain frequently employs heuristics because

Correct AnswerverifiedShow Answer

The endowment effect describes when people value a good more when they own it than when they don't.

Correct AnswerverifiedShow Answer

Time inconsistency refers to the phenomenon where your present self misjudges what your future self will do.

Correct AnswerverifiedShow Answer

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