Question 1

Josh will receive a salary of $300,000 next year. According to prospect theory,

Accepted Answer

A)   Josh will be happy with that amount regardless of what he has made in the past.
B)   Josh will only be happy with that salary if everyone else around him makes less than he does.
C)   Josh will only be happy with that salary if his cost of living has not increased.
D)   Josh's satisfaction with that salary depends on how much he made in the past.E) B) and C)
F) B) and D)

Question 2

Which of the following is a key difference between the dictator game and the ultimatum game?

Accepted Answer

A)   The dictator game is played with real money; the ultimatum game is played with hypothetical money.
B)   In the dictator game, one person has total control over the split; in the ultimatum game, both players have to agree to the split.
C)   Results of dictator game experiments reveal that people don't care about fairness; results of the ultimatum game indicate that they do care.
D)   There is no difference between them; they are simply different names for the same game.E) A) and C)
F) B) and C)

Question 3

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

Question 4

Neoclassical and behavioral economics are generally viewed as complementary.

Accepted Answer

A) True 
 B)False

Question 5

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 6

According to behavioral economists, self-control problems

Accepted Answer

A)   are a rare aberration from rational decision making.
B)   are often caused by time inconsistency.
C)   can be easily overcome by providing decision makers with better information.
D)   occur frequently but have no impact on the ability of neoclassical models to predict economic outcomes.E) A) and B)
F) A) and C)

Question 7

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

Question 8

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 C)
F) B) and D)

Question 9

Behavioral economics demonstrates that the threat of rejection makes people less likely to engage in transactions.

Accepted Answer

A) True 
 B)False

Question 10

Behavioral economics hopes to eventually fully replace the neoclassical economic model.

Accepted Answer

A) True 
 B)False

Question 11

When people react to (or perceive)  identical situations differently in different contexts, we call that the

Accepted Answer

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

Question 12

Edgar and Felicity are players in an ultimatum game for $100, where Felicity is the proposer and Edgar is the responder. Suppose that Felicity proposes that she receive $95, while Edgar receives only $5. How would behavioral economists expect Edgar to respond?

Accepted Answer

A)   Even though Edgar would be better off having $5 versus nothing, Edgar will likely see the offer as unfair and reject it.
B)   Edgar will accept the $5, as rejecting it would be economically irrational.
C)   Edgar will suggest a counteroffer that he would accept.
D)   Edgar will accept the offer if he is thinking with brain System 1 but reject it if thinking with brain System 2.E) A) and B)
F) A) and C)

Question 13

In developing prospect theory, which of the following did behavioral economists not discover about people's reaction to goods and bads?

Accepted Answer

A)   People feel equivalent losses and gains in equal measure, supporting the assumption that consumers behave rationally.
B)   People are generally loss averse, feeling losses more intensely than gains.
C)   People judge good and bad outcomes relative to the status quo.
D)   People experience both diminishing marginal utility from gains and diminishing marginal disutility from losses.E) A) and B)
F) A) and C)

Question 14

Which of the following statements about human-brain activity is true?

Accepted Answer

A)   Unconscious intuition uses the newer parts of the brain in the front part of the head.
B)   Conscious deliberation uses the older parts of the brain in the front part of the head.
C)   Conscious deliberation uses the newer parts of the brain in the front part of the head.
D)   Unconscious intuition uses the older parts of the brain in the front part of the head.E) A) and D)
F) B) and D)

Question 15

So-called precommitments are effective ways of fighting

Accepted Answer

A)   framing effects.
B)   mental accounting.
C)   anchoring.
D)   self-control problems.E) All of the above
F) C) and D)

Question 16

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

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

Question 18

A key difference between neoclassical economics and behavioral economics is that in behavioral economics, context affects preferences.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

"Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.

Accepted Answer

A) True 
 B)False

Exam 8: Behavioral Economics

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

Correct Answer
verified

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 Answer
verified

Behavioral economics demonstrates that the threat of rejection makes people less likely to engage in transactions.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

In developing prospect theory, which of the following did behavioral economists not discover about people's reaction to goods and bads?

Correct Answer
verified

Which of the following is a key difference between the dictator game and the ultimatum game?

Correct Answer
verified

So-called precommitments are effective ways of fighting

Correct Answer
verified

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

Correct Answer
verified

According to behavioral economists, self-control problems

Correct Answer
verified

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

Correct Answer
verified

A key difference between neoclassical economics and behavioral economics is that in behavioral economics, context affects preferences.

Correct Answer
verified

Which of the following statements about human-brain activity is true?

Correct Answer
verified

Josh will receive a salary of $300,000 next year. According to prospect theory,

Correct Answer
verified

Behavioral economics hopes to eventually fully replace the neoclassical economic model.

Correct Answer
verified

Edgar and Felicity are players in an ultimatum game for $100, where Felicity is the proposer and Edgar is the responder. Suppose that Felicity proposes that she receive $95, while Edgar receives only $5. How would behavioral economists expect Edgar to respond?

Correct Answer
verified

"Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.

Correct Answer
verified

Neoclassical and behavioral economics are generally viewed as complementary.

Correct Answer
verified

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

Correct Answer
verified

When people react to (or perceive) identical situations differently in different contexts, we call that the

Correct Answer
verified

Exam 8: Behavioral Economics

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

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

Behavioral economics demonstrates that the threat of rejection makes people less likely to engage in transactions.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In developing prospect theory, which of the following did behavioral economists not discover about people's reaction to goods and bads?

Correct AnswerverifiedShow Answer

Which of the following is a key difference between the dictator game and the ultimatum game?

Correct AnswerverifiedShow Answer

So-called precommitments are effective ways of fighting

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to behavioral economists, self-control problems

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A key difference between neoclassical economics and behavioral economics is that in behavioral economics, context affects preferences.

Correct AnswerverifiedShow Answer

Which of the following statements about human-brain activity is true?

Correct AnswerverifiedShow Answer

Josh will receive a salary of $300,000 next year. According to prospect theory,

Correct AnswerverifiedShow Answer

Behavioral economics hopes to eventually fully replace the neoclassical economic model.

Correct AnswerverifiedShow Answer

Edgar and Felicity are players in an ultimatum game for $100, where Felicity is the proposer and Edgar is the responder. Suppose that Felicity proposes that she receive $95, while Edgar receives only $5. How would behavioral economists expect Edgar to respond?

Correct AnswerverifiedShow Answer

"Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.

Correct AnswerverifiedShow Answer

Neoclassical and behavioral economics are generally viewed as complementary.

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

When people react to (or perceive) identical situations differently in different contexts, we call that the

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