Question 1

Carlos and Darla are representative individuals 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 by behavioral economists, about a third of the time we 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) A) and B)
F) B) and D)

Question 2

According to behavioral economists, people's preferences toward a particular outcome

Accepted Answer

A)  depend heavily on the contextual information that defines whether that outcome is a gain or a loss.
B)  are context independent because the same state of being is created regardless of one's previous circumstances.
C)  differ across people but are fixed for any given individual.
D)  depend primarily on genetics rather than environmental or contextual forces.E) C) and D)
F) All of the above

Question 3

Both neoclassical and behavioral economics believe that people are mostly rational in both their decision making and their actions.

Accepted Answer

A) True 
 B)False

Question 4

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 D)

Question 5

Fred just purchased an expensive new refrigerator and is considering purchasing the overpriced warranty. In making his decision on the warranty, Fred ignores better ways that his money could be spent, including paying off high-interest credit card debt. According to prospect theory, the process that leads Fred to ignore the debt and buy the overpriced warranty is

Accepted Answer

A)  framing bias.
B)  anchoring.
C)  mental accounting.
D)  confirmation bias.E) A) and B)
F) None of the above

Question 6

When Lucian starts his new job, he is given the option to contribute to his retirement fund, which the company will match up to 5 percent of his base salary. Lucian knows he can afford to contribute to his retirement fund; he only needs to file a form to activate the contributions and matching. According to prospect theory, if Lucian is typical in his behavior, we would expect him to

Accepted Answer

A)  take full advantage of the matching contribution because that would maximize his financial well-being.
B)  not file the form to start the contribution and match.
C)  negotiate with his boss for a higher match in order to increase his returns.
D)  only start contributions if the retirement portfolio is heavily weighted in high-return assets.E) A) and B)
F) A) and D)

Question 7

Eric tries to eat more healthfully by eliminating cookies, donuts, and similar snacks from his diet. Every day at work, however, coworkers bring in these treats and Eric succumbs to temptation. Which of the following concepts would behavioral economists use to explain Eric's self-control problem?

Accepted Answer

A)  time inconsistency
B)  availability heuristic
C)  self-serving bias
D)  system 2 processes dominating decision makingE) A) and D)
F) A) and C)

Question 8

The facts that many people give to charity and that most people obey the law regardless of whether someone is watching or not, are field evidence for

Accepted Answer

A)  the invisible hand.
B)  fairness.
C)  self-interest.
D)  cognitive biases.E) A) and D)
F) B) and C)

Question 9

Neoclassical economic models make simplifying assumptions about people's rationality and preferences for the following reasons, except

Accepted Answer

A)  these assumptions make the models mathematically elegant.
B)  these assumptions allow the models to be conveniently solved mathematically.
C)  these assumptions allow the models to generate quite precise predictions of behavior.
D)  these assumptions allow the models to generate quite accurate predictions of behavior.E) A) and C)
F) A) and D)

Question 10

Which of the following best describes the relationship between market transactions and the ultimatum and dictator games?

Accepted Answer

A)  Market transactions operate more like the ultimatum game than the dictator game.
B)  Market transactions operate more like the dictator game than the ultimatum game.
C)  The ultimatum and dictator games both provide good representations of how market transactions work.
D)  Neither the ultimatum game nor the dictator game bears much similarity to market transactions.E) A) and D)
F) A) and C)

Question 11

Myopia and time inconsistency are major stumbling blocks that behavioral economists have found in people's ability to make decisions that involve trade-offs between

Accepted Answer

A)  importing and exporting.
B)  work and leisure.
C)  the private sector and the government.
D)  the present and the future.E) A) and C)
F) All of the above

Question 12

A central focus of prospect theory is

Accepted Answer

A)  how people deal with "bads," as well as how they deal with "goods."
B)  optimizing precious metal discovery and extraction.
C)  maximizing returns from investment portfolios.
D)  how people make rational decisions despite having incomplete information.E) A) and D)
F) A) and C)

Question 13

Recognition heuristics help advertisers gain customers.

Accepted Answer

A) True 
 B)False

Question 14

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) A) and B)
F) A) and C)

Question 15

The threat of rejection is part of what makes the invisible hand a valid metaphor for how the market system works.

Accepted Answer

A) True 
 B)False

Question 16

Suppose Faith and Mickey are playing both dictator and ultimatum games. Faith is the dictator/proposer and has $1,000 to allocate. Based on repeated experiments of the dictator and ultimatum games, what payouts to Faith would be most consistent with the findings of behavioral economists?

Accepted Answer

A)  Faith receives $1,000 from the dictator game and $1,000 from the ultimatum game.
B)  Faith receives $500 from the dictator game and $420 from the ultimatum game.
C)  Faith receives $500 from the dictator game and $500 from the ultimatum game.
D)  Faith receives $580 from the dictator game and $540 from the ultimatum game.E) A) and C)
F) All of the above

Question 17

Which of the following questions best illustrates the "framing effects" studied by behavioral economists?

Accepted Answer

A)  Which would you rather have after lunch today, an apple or an orange?
B)  How much would you rather receive: $100 while everyone else gets $110, or $80 like everyone else?
C)  Where would you rather invest your funds, in stocks or gold certificates?
D)  What would you rather do: go to college and postpone having a full-time job, or forgo college and get a full-time job now?E) A) and B)
F) A) and D)

Question 18

Which of the following is the best example of a System 2 decision and action?

Accepted Answer

A)  Marty learns that his usual driving route to work will have significant delays due to construction but forgets and goes that way anyway.
B)  Doug eats a whole plate of nachos despite the fact it compromises his carefully planned diet.
C)  Bruce "goes with his gut" when choosing between two kinds of motorcycles to purchase.
D)  Chuck, who has contemplated a job change for a month and has other offers, chooses to quit when his boss makes him mad.E) B) and C)
F) None of the above

Question 19

So-called precommitments are effective ways of fighting

Accepted Answer

A)  framing effects.
B)  mental accounting.
C)  anchoring.
D)  self-control problems.E) None of the above
F) B) and D)

Question 20

One consequence of the confirmation bias is that many people believe that they could "beat the (stock)market."

Accepted Answer

A) True 
 B)False

Exam 8: Behavioral Economics

Myopia and time inconsistency are major stumbling blocks that behavioral economists have found in people's ability to make decisions that involve trade-offs between

Correct Answer
verified

The facts that many people give to charity and that most people obey the law regardless of whether someone is watching or not, are field evidence for

Correct Answer
verified

According to behavioral economists, people's preferences toward a particular outcome

Correct Answer
verified

One consequence of the confirmation bias is that many people believe that they could "beat the (stock)market."

Correct Answer
verified

Carlos and Darla are representative individuals 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 by behavioral economists, about a third of the time we would expect

Correct Answer
verified

Recognition heuristics help advertisers gain customers.

Correct Answer
verified

Which of the following questions best illustrates the "framing effects" studied by behavioral economists?

Correct Answer
verified

A central focus of prospect theory is

Correct Answer
verified

So-called precommitments are effective ways of fighting

Correct Answer
verified

Both neoclassical and behavioral economics believe that people are mostly rational in both their decision making and their actions.

Correct Answer
verified

Correct Answer
verified

Suppose Faith and Mickey are playing both dictator and ultimatum games. Faith is the dictator/proposer and has $1,000 to allocate. Based on repeated experiments of the dictator and ultimatum games, what payouts to Faith would be most consistent with the findings of behavioral economists?

Correct Answer
verified

Eric tries to eat more healthfully by eliminating cookies, donuts, and similar snacks from his diet. Every day at work, however, coworkers bring in these treats and Eric succumbs to temptation. Which of the following concepts would behavioral economists use to explain Eric's self-control problem?

Correct Answer
verified

Neoclassical economic models make simplifying assumptions about people's rationality and preferences for the following reasons, except

Correct Answer
verified

Correct Answer
verified

Which of the following is the best example of a System 2 decision and action?

Correct Answer
verified

Correct Answer
verified

The threat of rejection is part of what makes the invisible hand a valid metaphor for how the market system works.

Correct Answer
verified

Which of the following best describes the relationship between market transactions and the ultimatum and dictator games?

Correct Answer
verified

According to behavioral economics, cognitive biases

Correct Answer
verified

Exam 8: Behavioral Economics

Myopia and time inconsistency are major stumbling blocks that behavioral economists have found in people's ability to make decisions that involve trade-offs between

Correct AnswerverifiedShow Answer

The facts that many people give to charity and that most people obey the law regardless of whether someone is watching or not, are field evidence for

Correct AnswerverifiedShow Answer

According to behavioral economists, people's preferences toward a particular outcome

Correct AnswerverifiedShow Answer

One consequence of the confirmation bias is that many people believe that they could "beat the (stock)market."

Correct AnswerverifiedShow Answer

Carlos and Darla are representative individuals 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 by behavioral economists, about a third of the time we would expect

Correct AnswerverifiedShow Answer

Recognition heuristics help advertisers gain customers.

Correct AnswerverifiedShow Answer

Which of the following questions best illustrates the "framing effects" studied by behavioral economists?

Correct AnswerverifiedShow Answer

A central focus of prospect theory is

Correct AnswerverifiedShow Answer

So-called precommitments are effective ways of fighting

Correct AnswerverifiedShow Answer

Both neoclassical and behavioral economics believe that people are mostly rational in both their decision making and their actions.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose Faith and Mickey are playing both dictator and ultimatum games. Faith is the dictator/proposer and has $1,000 to allocate. Based on repeated experiments of the dictator and ultimatum games, what payouts to Faith would be most consistent with the findings of behavioral economists?

Correct AnswerverifiedShow Answer

Eric tries to eat more healthfully by eliminating cookies, donuts, and similar snacks from his diet. Every day at work, however, coworkers bring in these treats and Eric succumbs to temptation. Which of the following concepts would behavioral economists use to explain Eric's self-control problem?

Correct AnswerverifiedShow Answer

Neoclassical economic models make simplifying assumptions about people's rationality and preferences for the following reasons, except

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is the best example of a System 2 decision and action?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The threat of rejection is part of what makes the invisible hand a valid metaphor for how the market system works.

Correct AnswerverifiedShow Answer

Which of the following best describes the relationship between market transactions and the ultimatum and dictator games?

Correct AnswerverifiedShow Answer

According to behavioral economics, cognitive biases

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified