Question 1

Recognition heuristics help advertisers gain customers.

Accepted Answer

A) True 
 B)False

Question 2

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 3

The dictator game

Accepted Answer

A)   reveals nothing important about economic behavior because the money used is hypothetical.
B)   demonstrates that people care about fairness and will sacrifice financially for others.
C)   demonstrates nothing definitive about fairness, as concerns about the other player's perceptions will influence the dictator's choices.
D)   regularly results in the dictator taking all of the money for him/herself, as economic theory would predict.E) B) and C)
F) A) and C)

Question 4

The fact that specific areas of the human brain deal with specific sensations and activities like hearing, speech, and breathing is referred to as brain

Accepted Answer

A)   heuristics.
B)   specificity.
C)   modularity.
D)   myopia.E) None of the above
F) A) and B)

Question 5

Why, according to behavioral economics, would supermarkets place gum, candy, and other small convenience items near the cash registers?

Accepted Answer

A)   Those are the shelving locations that minimize costs.
B)   Stores try to make frequently purchased items quicker and easier for consumers to access.
C)   Smaller items tend to fall through shopping cart holes, so stores reduce that problem for consumers by having smaller items at the checkout stands.
D)   Many of these are small items that people will buy on an impulse.E) A) and C)
F) A) and B)

Question 6

A company has designed an alarm clock that "runs and hides" after going off, forcing the person to get up and find the alarm clock if he or she wants to shut off the alarm. According to behavioral economists,

Accepted Answer

A)   it is unlikely to alter people's tendency to shut off the alarm and ultimately oversleep.
B)   the alarm clock keeps people from hitting the snooze button and taking advantage of the availability heuristic.
C)   the alarm clock serves as a precommitment device, helping the user to stick to the originally planned wake-up time.
D)   overconfidence effects will discourage use of such devices.E) B) and C)
F) All of the above

Question 7

Bucky and Satchel are offered identical jobs, each paying $80,000 per year. According to behavioral economics,

Accepted Answer

A)   they should feel equally good about the job offer.
B)   how each will feel about the job offer will depend on their current positions and incomes.
C)   if Bucky's current income is $60,000 per year, and Satchel's is $70,000 per year, we would expect Bucky to receive twice as much additional utility from taking the job as Satchel would.
D)   if the jobs will not change their income, they are more likely to switch jobs than remain with the status quo.E) B) and C)
F) None of the above

Question 8

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

Question 9

The process by which people isolate purchases and fail to consider all consumption options simultaneously is known as

Accepted Answer

A)   framing.
B)   mental accounting.
C)   anchoring.
D)   the endowment effect.E) A) and B)
F) C) and D)

Question 10

People's tendency to prefer the "default" option over other options is known in prospect theory as

Accepted Answer

A)   the anchoring effect.
B)   the mental accounting effect.
C)   status quo bias.
D)   confirmation bias.E) A) and D)
F) B) and C)

Question 11

(Consider This)  Kara was earning $40,000 per year. When her income rose to $60,000 per year, she enjoyed the higher level of consumption for a while, but eventually she was no more happy than when she earned $40,000 (assume prices didn't change over this time period) . Economist Richard Easterlin described this as

Accepted Answer

A)   anchoring.
B)   the endowment effect.
C)   irrational economic behavior.
D)   the hedonic treadmill.E) B) and D)
F) None of the above

Question 12

Hardwired heuristics make it easy to change behavior by simply presenting people with better information.

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) A) and C)

Question 14

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) None of the above
F) B) and C)

Question 15

In the financial crisis that precipitated the 2007-2009 recession, people systematically overestimated their prospects for financial gain. Which branch of economics would most likely have expected to predict this?

Accepted Answer

A)   neoclassical economics
B)   Keynesian economics
C)   behavioral economics
D)   classical economicsE) A) and B)
F) A) and C)

Question 16

According to the concept of framing effects,

Accepted Answer

A)   advertising power is limited because of the inability of firms to change consumers' perspectives.
B)   all people will assign the same utility to a given situation, regardless of their previous status quo.
C)   whether a new situation is viewed as a gain or a loss depends on one's starting position.
D)   firms should never raise prices or reduce wages.E) B) and D)
F) A) and D)

Question 17

Behavioral economists criticize neoclassical models as being

Accepted Answer

A)   messy and imprecise.
B)   accurate but artificially elegant.
C)   precise but inaccurate.
D)   vague but accurate.E) C) and D)
F) B) and C)

Question 18

Automatic payroll deductions help people to fight their time inconsistency problem with regards to saving.

Accepted Answer

A) True 
 B)False

Question 19

Neoclassical economists generally believe which of the following about human behavior?

Accepted Answer

A)   While individuals attempt to make rational decisions, poor computational skills often lead to systematic errors.
B)   People care a lot about fairness and are often willing to sacrifice some of their own well-being to treat others fairly.
C)   When individuals make mistakes in decision making, they adjust to these errors and rarely repeat them.
D)   When individuals are selfless and act for the good of others, the invisible hand guides the collective behaviors to promote the good of society.E) B) and C)
F) C) and D)

Question 20

Neoclassical economics and behavioral economics disagree on the following assumptions, except

Accepted Answer

A)   rationality of people.
B)   determinants of market prices.
C)   stability of people's preferences.
D)   strength of people's willpower.E) A) and B)
F) B) and D)

Exam 8: Behavioral Economics

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.

Correct Answer
verified

The fact that specific areas of the human brain deal with specific sensations and activities like hearing, speech, and breathing is referred to as brain

Correct Answer
verified

A company has designed an alarm clock that "runs and hides" after going off, forcing the person to get up and find the alarm clock if he or she wants to shut off the alarm. According to behavioral economists,

Correct Answer
verified

People's tendency to prefer the "default" option over other options is known in prospect theory as

Correct Answer
verified

In the financial crisis that precipitated the 2007-2009 recession, people systematically overestimated their prospects for financial gain. Which branch of economics would most likely have expected to predict this?

Correct Answer
verified

Bucky and Satchel are offered identical jobs, each paying $80,000 per year. According to behavioral economics,

Correct Answer
verified

The process by which people isolate purchases and fail to consider all consumption options simultaneously is known as

Correct Answer
verified

Neoclassical economics and behavioral economics disagree on the following assumptions, except

Correct Answer
verified

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

Correct Answer
verified

Hardwired heuristics make it easy to change behavior by simply presenting people with better information.

Correct Answer
verified

According to the concept of framing effects,

Correct Answer
verified

Correct Answer
verified

Behavioral economists criticize neoclassical models as being

Correct Answer
verified

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

Correct Answer
verified

Neoclassical economists generally believe which of the following about human behavior?

Correct Answer
verified

According to behavioral economics,

Correct Answer
verified

Automatic payroll deductions help people to fight their time inconsistency problem with regards to saving.

Correct Answer
verified

Recognition heuristics help advertisers gain customers.

Correct Answer
verified

Why, according to behavioral economics, would supermarkets place gum, candy, and other small convenience items near the cash registers?

Correct Answer
verified

The dictator game

Correct Answer
verified

Exam 8: Behavioral Economics

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.

Correct AnswerverifiedShow Answer

The fact that specific areas of the human brain deal with specific sensations and activities like hearing, speech, and breathing is referred to as brain

Correct AnswerverifiedShow Answer

A company has designed an alarm clock that "runs and hides" after going off, forcing the person to get up and find the alarm clock if he or she wants to shut off the alarm. According to behavioral economists,

Correct AnswerverifiedShow Answer

People's tendency to prefer the "default" option over other options is known in prospect theory as

Correct AnswerverifiedShow Answer

In the financial crisis that precipitated the 2007-2009 recession, people systematically overestimated their prospects for financial gain. Which branch of economics would most likely have expected to predict this?

Correct AnswerverifiedShow Answer

Bucky and Satchel are offered identical jobs, each paying $80,000 per year. According to behavioral economics,

Correct AnswerverifiedShow Answer

The process by which people isolate purchases and fail to consider all consumption options simultaneously is known as

Correct AnswerverifiedShow Answer

Neoclassical economics and behavioral economics disagree on the following assumptions, except

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Hardwired heuristics make it easy to change behavior by simply presenting people with better information.

Correct AnswerverifiedShow Answer

According to the concept of framing effects,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Behavioral economists criticize neoclassical models as being

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Neoclassical economists generally believe which of the following about human behavior?

Correct AnswerverifiedShow Answer

According to behavioral economics,

Correct AnswerverifiedShow Answer

Automatic payroll deductions help people to fight their time inconsistency problem with regards to saving.

Correct AnswerverifiedShow Answer

Recognition heuristics help advertisers gain customers.

Correct AnswerverifiedShow Answer

Why, according to behavioral economics, would supermarkets place gum, candy, and other small convenience items near the cash registers?

Correct AnswerverifiedShow Answer

The dictator game

Correct AnswerverifiedShow Answer

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