Question 1

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

Question 2

Heuristics generally operate in brain System 2.

Accepted Answer

A) True 
 B)False

Question 3

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) B) and D)
F) All of the above

Question 4

When someone tries to "multitask" despite mounting evidence that multitasking is actually inefficient, this illustrates

Accepted Answer

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

Question 5

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

Question 6

One explanation for why major construction projects often get completed way behind schedule is the

Accepted Answer

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

Question 7

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

Question 8

According to behavioral economics, the difficulty among many people to stick to a diet or an exercise plan is partly explained by

Accepted Answer

A)   myopia.
B)   mental accounting.
C)   anchoring.
D)   framing.E) None of the above
F) All of the above

Question 9

Behavioral economists put significant emphasis on using models to

Accepted Answer

A)   predict decisions, but not so much to understand how those decisions are made.
B)   predict decisions and also to understand how those decisions are made.
C)   understand decision processes, but not the prediction of the decision itself.
D)   understand people's actions, but not what drives people to act in certain ways.E) A) and C)
F) None of the above

Question 10

In the face of rising costs, some firms reduce the quality of the goods they produce rather than maintain quality and increase prices. How would behavioral economics explain this strategy?

Accepted Answer

A)   People have an aversion to losses, and consumers are more likely to feel the loss of a price increase than a quality reduction.
B)   Consumers are more tolerant of diminished quality because diminishing marginal utility causes people to get rid of goods sooner than in the past.
C)   Firms are myopic in their decision making, with little regard for future profitability.
D)   The availability heuristic will cause people to buy whatever is offered, regardless of the quality.E) C) and D)
F) None of the above

Question 11

Precommitments are a tool designed to overcome time inconsistency.

Accepted Answer

A) True 
 B)False

Question 12

Behavioral economists believe that the human brain is generally

Accepted Answer

A)   efficient and accurate.
B)   efficient but prone to errors.
C)   inefficient but accurate.
D)   inefficient and prone to errors.E) A) and B)
F) A) and D)

Question 13

"Time inconsistency" refers to the

Accepted Answer

A)   tendency for policies with high short-run benefits to have high long-run costs.
B)   fallacy that what is true for the short run must be true for the long run.
C)   tendency to regularly misjudge in the present what you will do in the future.
D)   tendency to misjudge how long it will take to accomplish a future task.E) B) and C)
F) A) and D)

Question 14

Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a neoclassical economist would expect Susie to

Accepted Answer

A)   carefully weigh the short-term benefits against the long-term costs and make a rational decision about how many treats to eat.
B)   eat more sugary treats than is optimal, as she likely gives more weight to present events and outcomes than to ones in the future.
C)   give away most of her sugary treats in an effort to resist temptation.
D)   determine her fair share of the sugary treats available, and only eat those.E) All of the above
F) A) and B)

Question 15

Suppose Gina and Henry play two rounds of the ultimatum game. In the first round they play for $10; in the second round they play for $1,000. In the first round Gina suggests an 80/20 split ($8 to Gina, $2 to Henry) , but Henry quickly rejects the offer as unfair. Assuming Gina is interested in gaining financially from the experience and that she understands behavioral economics, we would expect her to

Accepted Answer

A)   offer the same relative split ($800/$200) , knowing that Henry will accept the offer because the dollar amount he would forgo by rejecting it is substantial.
B)   offer a more unequal split ($900/$100)  in order to gain more for herself and figuring Henry will accept the split because $100 is better than nothing.
C)   offer a more equal split ($700/$300)  to increase the probability that Henry will accept the offer.
D)   offer Henry more than half of the pot to ensure acceptance of the offer.E) A) and B)
F) A) and D)

Question 16

Because neoclassical economists assume that people are rational decision makers, they

Accepted Answer

A)   are able to make better predictions about economic behaviors and outcomes.
B)   ignore the mental processes by which these decisions are made.
C)   believe that people never make suboptimal decisions.
D)   believe it is best to limit the number of options people have available.E) B) and D)
F) All of the above

Question 17

"Impulse buying" is often the result of a

Accepted Answer

A)   rational optimizing decision in response to incentives and prices.
B)   precise estimation of one's marginal utilities and price comparisons.
C)   systematic nonrational behavior that marketers can take advantage of.
D)   random error in a consumer's behavior that is not predictable.E) C) and D)
F) None of the above

Question 18

Most people's natural aversion against complex mathematical problems is an example of

Accepted Answer

A)   confirmation bias.
B)   a mental heuristic.
C)   rational choice.
D)   cognitive bias.E) All of the above
F) None of the above

Question 19

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 20

Heuristics can be exploited to lead people to positive outcomes.

Accepted Answer

A) True 
 B)False

Exam 8: Behavioral Economics

Most people's natural aversion against complex mathematical problems is an example of

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

In the face of rising costs, some firms reduce the quality of the goods they produce rather than maintain quality and increase prices. How would behavioral economics explain this strategy?

Correct Answer
verified

Heuristics generally operate in brain System 2.

Correct Answer
verified

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

Correct Answer
verified

According to behavioral economics, cognitive biases

Correct Answer
verified

According to behavioral economics, the difficulty among many people to stick to a diet or an exercise plan is partly explained by

Correct Answer
verified

Precommitments are a tool designed to overcome time inconsistency.

Correct Answer
verified

Because neoclassical economists assume that people are rational decision makers, they

Correct Answer
verified

One explanation for why major construction projects often get completed way behind schedule is the

Correct Answer
verified

Behavioral economists believe that the human brain is generally

Correct Answer
verified

"Impulse buying" is often the result of a

Correct Answer
verified

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

Correct Answer
verified

"Time inconsistency" refers to the

Correct Answer
verified

Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a neoclassical economist would expect Susie to

Correct Answer
verified

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

Correct Answer
verified

Behavioral economists put significant emphasis on using models to

Correct Answer
verified

When someone tries to "multitask" despite mounting evidence that multitasking is actually inefficient, this illustrates

Correct Answer
verified

Heuristics can be exploited to lead people to positive outcomes.

Correct Answer
verified

Exam 8: Behavioral Economics

Most people's natural aversion against complex mathematical problems is an example of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the face of rising costs, some firms reduce the quality of the goods they produce rather than maintain quality and increase prices. How would behavioral economics explain this strategy?

Correct AnswerverifiedShow Answer

Heuristics generally operate in brain System 2.

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

According to behavioral economics, cognitive biases

Correct AnswerverifiedShow Answer

According to behavioral economics, the difficulty among many people to stick to a diet or an exercise plan is partly explained by

Correct AnswerverifiedShow Answer

Precommitments are a tool designed to overcome time inconsistency.

Correct AnswerverifiedShow Answer

Because neoclassical economists assume that people are rational decision makers, they

Correct AnswerverifiedShow Answer

One explanation for why major construction projects often get completed way behind schedule is the

Correct AnswerverifiedShow Answer

Behavioral economists believe that the human brain is generally

Correct AnswerverifiedShow Answer

"Impulse buying" is often the result of a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

"Time inconsistency" refers to the

Correct AnswerverifiedShow Answer

Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a neoclassical economist would expect Susie to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Behavioral economists put significant emphasis on using models to

Correct AnswerverifiedShow Answer

When someone tries to "multitask" despite mounting evidence that multitasking is actually inefficient, this illustrates

Correct AnswerverifiedShow Answer

Heuristics can be exploited to lead people to positive outcomes.

Correct AnswerverifiedShow Answer

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