Question 1

Scientists studying human behavior have found that people tend to

Accepted Answer

A)  always make rational decisions.
B)  make systematic errors in their decisions.
C)  make only random errors in their decisions.
D)  always make decisions that are not rational.E) None of the above
F) A) and D)

Question 2

Framing effects may cause the same person to view the same new situation differently depending on whether that new situation makes him or her better or worse off.

Accepted Answer

A) True 
 B)False

Question 3

For economists, "myopia" refers to

Accepted Answer

A)  visual nearsightedness.
B)  people's difficulty in conceptualizing the future.
C)  people's tendency to put too much emphasis on the future and ignore important present concerns.
D)  people's tendency to focus on microeconomic concerns because of an inability to conceptualize macroeconomics.E) B) and C)
F) A) and D)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which of the following does not illustrate the use of heuristics?

Accepted Answer

A)  baseball players locking their eyes on the ball in order to have a good chance of catching it
B)  scientists using the laws of physics and mathematics to predict where billiard balls will roll
C)  companies spending a lot on advertising in order to make their brands better known
D)  staying upright on a bicycle by steering in the direction of a fall when one begins to happenE) B) and C)
F) A) and B)

Question 6

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 7

Recognition heuristics help advertisers gain customers.

Accepted Answer

A) True 
 B)False

Question 8

Results of the dictator and ultimatum games reveal that people act in equally self-interested ways, regardless of the context or rules of the game.

Accepted Answer

A) True 
 B)False

Question 9

Neoclassical theory suggests that to the extent impulse buying occurs, it is infrequent and does not affect the ability of economic models to predict behavior.

Accepted Answer

A) True 
 B)False

Question 10

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

Question 11

Behavioral economists believe that while people try to make rational decisions, they are frequently subject to systematic errors.

Accepted Answer

A) True 
 B)False

Question 12

People's tendency to attribute their successes to personal effort or a special personal trait, while blaming their failures on the faults of others or on something beyond their control is called

Accepted Answer

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

Question 13

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 14

The dictator and ultimatum games reveal that fairness and concern for others motivate people's behavior.

Accepted Answer

A) True 
 B)False

Question 15

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)  wor k and leisure.
C)  the private sector and the government.
D)  the present and the future.E) B) and D)
F) B) and C)

Question 16

Brain scientists have found that the human brain devotes more neurons toward processing and interpreting visual information than it does to anything else.Therefore,

Accepted Answer

A)  we can always believe what our eyes tell us.
B)  we should only believe what our eyes tell us.
C)  since our eyes can fool us, we probably make mental mistakes in other areas too.
D)  behavioral and neoclassical economists agree that our visual impressions are always right.E) All of the above
F) A) and D)

Question 17

That most people would prefer to buy meat that is 80 percent lean rather than meat that is 20 percent fat is an illustration of the

Accepted Answer

A)  anchoring effect.
B)  framing effect.
C)  confirmation bias.
D)  endowment effect.E) A) and B)
F) A) and C)

Question 18

People feel losses about two and a half times more intensely than they feel gains.

Accepted Answer

A) True 
 B)False

Question 19

Behavioral economists have not discovered which of the following things about people's reaction to losses?

Accepted Answer

A)  People judge losses in relative terms; i.e., relative to the status quo.
B)  People experience increasing marginal disutility from losses.
C)  People would feel the loss of $1,000 more intensely than they would feel the gain of $1,000.
D)  When people lose successive equal amounts, the initial losses are more painful than later ones.E) None of the above
F) A) and B)

Question 20

The so-called Lake Wobegon effect, where everyone in a group claims to be above average, illustrates the

Accepted Answer

A)  confirmation bias.
B)  framing effect.
C)  overconfidence effect.
D)  self-serving bias.E) B) and C)
F) C) and D)

Exam 8: Behavioral Economics

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Results of the dictator and ultimatum games reveal that people act in equally self-interested ways, regardless of the context or rules of the game.

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

Behavioral economists believe that while people try to make rational decisions, they are frequently subject to systematic errors.

Correct AnswerverifiedShow Answer

For economists, "myopia" refers to

Correct AnswerverifiedShow Answer

Neoclassical theory suggests that to the extent impulse buying occurs, it is infrequent and does not affect the ability of economic models to predict behavior.

Correct AnswerverifiedShow Answer

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

Scientists studying human behavior have found that people tend to

Correct AnswerverifiedShow Answer

That most people would prefer to buy meat that is 80 percent lean rather than meat that is 20 percent fat is an illustration of the

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Which of the following does not illustrate the use of heuristics?

Correct AnswerverifiedShow Answer

The dictator and ultimatum games reveal that fairness and concern for others motivate people's behavior.

Correct AnswerverifiedShow Answer

Behavioral economists have not discovered which of the following things about people's reaction to losses?

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

People's tendency to attribute their successes to personal effort or a special personal trait, while blaming their failures on the faults of others or on something beyond their control is called

Correct AnswerverifiedShow Answer

People feel losses about two and a half times more intensely than they feel gains.

Correct AnswerverifiedShow Answer

Brain scientists have found that the human brain devotes more neurons toward processing and interpreting visual information than it does to anything else.Therefore,

Correct AnswerverifiedShow Answer

The so-called Lake Wobegon effect, where everyone in a group claims to be above average, illustrates the

Correct AnswerverifiedShow Answer

Framing effects may cause the same person to view the same new situation differently depending on whether that new situation makes him or her better or worse off.

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Recognition heuristics help advertisers gain customers.

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