Question 1

Myopia means

Accepted Answer

A)  far-sightedness.
B)  a tendency to focus on the future.
C)  a higher concern for the present.
D)  price sensitivity.E) A) and D)
F) A) and B)

Question 2

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.E) A) and B)
F) None of the above

Question 3

When people react to (or perceive) identical situations differently in different contexts, behavioral economists refer to that as the

Accepted Answer

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

Question 4

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) None of the above
F) A) and D)

Question 5

The threat of rejection in market transactions

Accepted Answer

A)  leads to higher prices, as sellers try to cover possible losses.
B)  leads to better products and lower prices for consumers.
C)  leads to less cooperation between buyers and sellers.
D)  does all of these.E) B) and C)
F) C) and D)

Question 6

Key features of so-called nudges include the following, except that

Accepted Answer

A)  they are subtle.
B)  they induce changes in behavior without bullying or coercion.
C)  they involve significant monetary incentives.
D)  they can be viewed by some as manipulation.E) None of the above
F) A) and B)

Question 7

"Heuristics" used by the human brain are one of the reasons why

Accepted Answer

A)  our preferences are quite stable and consistent.
B)  neoclassical economic models accurately predict human behavior.
C)  human perception is susceptible to context and prone to error.
D)  the utility-maximizing model of decision making is precise.E) B) and D)
F) B) and C)

Question 8

Behavioral economists suggest that brand loyalty, which can be a source of monopoly power for the producer, may be explained by consumers' tendency to have the

Accepted Answer

A)  anchoring effect.
B)  mental accounting effect.
C)  status quo bias.
D)  confirmation bias.E) All of the above
F) None of the above

Question 9

Should we view neoclassical economics and behavioral economics as mutually exclusive or as complementary?

Accepted Answer

We should view them as complementary app...

Question 10

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

Accepted Answer

A)  overconfidence bias.
B)  self-serving bias.
C)  framing bias.
D)  hindsight bias.E) All of the above
F) B) and D)

Question 11

Which of the following would represent a systematic error?

Accepted Answer

A)  Eddie regularly overspends. Friends and family bail him out, however, so he always ends up with what he wants.
B)  Ellen paid good money for a used car that is in constant need of repair.
C)  Sparky determines that he has to reduce donut consumption to lose weight but always ends up eating the ones provided in the break room at work.
D)  Clark makes regular math errors at work, sometimes coming out with figures too high, other times too low.E) C) and D)
F) A) and B)

Question 12

Behavioral economists avoid dealing with fairness concerns because the concept is too subjective.

Accepted Answer

A) True 
 B)False

Question 13

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.E) A) and B)
F) None of the above

Question 14

Prospect theory is based on behavioral economists' understanding of how people

Accepted Answer

A)  react to good things (or gains) and bad (or losses) .
B)  make predictions about their future income.
C)  search for job prospects or business prospects.
D)  behave under stressful conditions.E) All of the above
F) A) and C)

Question 15

According to behavioral economists, people tend to put too much weight on the future when they make decisions.

Accepted Answer

A) True 
 B)False

Question 16

When people change their decision just because the context of the given information is changed, we call that the "framing effect."

Accepted Answer

A) True 
 B)False

Question 17

Heuristics generally operate in brain System 2.

Accepted Answer

A) True 
 B)False

Question 18

Neoclassical economics and behavioral economics are similar in the assumption that people are capable of making accurate, sometimes complex, calculations with respect to their utility-maximizing decisions.

Accepted Answer

A) True 
 B)False

Question 19

Because of framing effects, a worker will be happy with a 5 percent raise regardless of how much of a raise her fellow employees receive.

Accepted Answer

A) True 
 B)False

Question 20

One important consequence of the confirmation bias is that

Accepted Answer

A)  some people cannot correct a personal trait that might be causing them to fail in many ventures.
B)  someone could persist in pursuing a failed policy despite overwhelming evidence of the failure.
C)  bad decisions can be made because people will act without pausing to see whether their intuition is correct or not.
D)  some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments.E) A) and B)
F) None of the above

Exam 8: Behavioral Economics

Prospect theory is based on behavioral economists' understanding of how people

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

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One important consequence of the confirmation bias is that

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Behavioral economists avoid dealing with fairness concerns because the concept is too subjective.

Correct AnswerverifiedShow Answer

Behavioral economists suggest that brand loyalty, which can be a source of monopoly power for the producer, may be explained by consumers' tendency to have the

Correct AnswerverifiedShow Answer

According to behavioral economics,

Correct AnswerverifiedShow Answer

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

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When people react to (or perceive) identical situations differently in different contexts, behavioral economists refer to that as the

Correct AnswerverifiedShow Answer

Key features of so-called nudges include the following, except that

Correct AnswerverifiedShow Answer

Because of framing effects, a worker will be happy with a 5 percent raise regardless of how much of a raise her fellow employees receive.

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Should we view neoclassical economics and behavioral economics as mutually exclusive or as complementary?

Correct AnswerverifiedWe should view them as complementary app...View AnswerShow Answer

When people change their decision just because the context of the given information is changed, we call that the "framing effect."

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"Heuristics" used by the human brain are one of the reasons why

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Which of the following would represent a systematic error?

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According to behavioral economists, people tend to put too much weight on the future when they make decisions.

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The threat of rejection in market transactions

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Neoclassical economics and behavioral economics are similar in the assumption that people are capable of making accurate, sometimes complex, calculations with respect to their utility-maximizing decisions.

Correct AnswerverifiedShow Answer

Myopia means

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Heuristics generally operate in brain System 2.

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

Correct AnswerverifiedShow Answer

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We should view them as complementary app...
View Answer

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