Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Question 3

What field evidence is available to help behavioral economists identify the ethical and moral factors that appear to have the largest influence on economic behavior.

Accepted Answer

Giving to Charity: Each year, U. S. char...

Question 4

"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

Question 5

Neoclassical economic analysis tends to disregard the following motivations in people's decisions and actions, except

Accepted Answer

A)  charity.
B)  selflessness.
C)  self-interest.
D)  focus on the common good.E) C) and D)
F) A) and B)

Question 6

Time inconsistency refers to the phenomenon where your present self misjudges what your future self will do.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

Economist John List has shown that the so-called endowment effect tends to be lower among people who often

Accepted Answer

A)  buy things for resale.
B)  buy things for personal long-term use.
C)  produce things for themselves.
D)  value their possessions.E) B) and C)
F) A) and D)

Question 9

Which of the following statements best reflects behavioral economists' views on self-interest versus the interests of others?

Accepted Answer

A)  Self-interest dominates human behavior; even seemingly selfless behavior is driven by self-interest.
B)  Most people care so deeply about others that self-interest is a minor consideration in their decision making.
C)  The system is most efficient when people focus solely on their self-interest and allow the invisible hand to work out what is best for society.
D)  People are always self-interested to a degree, but their behavior is also affected by moral and ethical considerations.E) All of the above
F) B) and D)

Question 10

Solar City helped homeowners overcome their myopia by

Accepted Answer

A)  providing improved information about the benefits of solar systems.
B)  framing the installation of solar systems against the environmental costs of nonrenewable energy sources.
C)  eliminating the upfront costs of solar systems.
D)  appealing to homeowners' sense of fairness with regard to environmental responsibility.E) B) and C)
F) A) and D)

Question 11

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 Mickey would be most consistent with the findings of behavioral economists?

Accepted Answer

A)  Mickey receives $0 from the dictator game and $100 from the ultimatum game.
B)  Mickey receives $500 from the dictator game and $420 from the ultimatum game.
C)  Mickey receives $500 from the dictator game and $500 from the ultimatum game.
D)  Mickey receives $420 from the dictator game and $470 from the ultimatum game.E) B) and C)
F) All of the above

Question 12

Examples of precommitments to deal with people's time inconsistency problems include the following, except

Accepted Answer

A)  automatic payroll deductions.
B)  debit card accounts.
C)  early withdrawal penalties.
D)  salary smoothing.E) None of the above
F) A) and B)

Question 13

Behavioral economics assumes that people are

Accepted Answer

A)  eager and able to estimate the benefits and costs of their decisions.
B)  very much aware of their preferences and are consistent in their preferences.
C)  prone to falling prey to temptation because they lack sufficient willpower.
D)  always focusing on their self-interest and maximizing their own net benefits.E) A) and C)
F) A) and B)

Question 14

One major consequence of the planning fallacy is that

Accepted Answer

A)  people may spend more resources to insure themselves against rare events, but leave themselves uninsured against more common events.
B)  someone could persist in pursuing a failed policy despite overwhelming evidence of the failure.
C)  major business projects may create bottlenecks in the organization because they are not completed as scheduled.
D)  some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments.E) None of the above
F) B) and C)

Question 15

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

Question 16

Fairness, according to behavioral economics,

Accepted Answer

A)  is too subjective to be considered in the analysis of economic behavior.
B)  can be objectively standardized across individuals.
C)  varies from one individual to another but still affects economic behavior in important ways.
D)  matters to people, but because of self-interest, fairness has little effect on their economic decisions.E) C) and D)
F) B) and C)

Question 17

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 Mickey would be most consistent with the findings of behavioral economists?

Accepted Answer

A)  Mickey receives $0 from the dictator game and $100 from the ultimatum game.
B)  Mickey receives $500 from the dictator game and $420 from the ultimatum game.
C)  Mickey receives $500 from the dictator game and $500 from the ultimatum game.
D)  Mickey receives $420 from the dictator game and $470 from the ultimatum game.E) A) and B)
F) A) and C)

Question 18

The threat of rejection in market transactions

Accepted Answer

A)  leads to better products for consumers.
B)  leads to lower prices for consumers.
C)  leads to greater cooperation between buyers and sellers.
D)  does all of these.E) B) and D)
F) B) and C)

Question 19

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 20

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

Exam 8: Behavioral Economics

Solar City helped homeowners overcome their myopia by

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements best reflects behavioral economists' views on self-interest versus the interests of others?

Correct AnswerverifiedShow Answer

The threat of rejection in market transactions

Correct AnswerverifiedShow Answer

One major consequence of the planning fallacy is that

Correct AnswerverifiedShow Answer

Neoclassical economic analysis tends to disregard the following motivations in people's decisions and actions, except

Correct AnswerverifiedShow Answer

Economist John List has shown that the so-called endowment effect tends to be lower among people who often

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Behavioral economics assumes that people are

Correct AnswerverifiedShow Answer

What field evidence is available to help behavioral economists identify the ethical and moral factors that appear to have the largest influence on economic behavior.

Correct AnswerverifiedGiving to Charity: Each year, U. S. char...View AnswerShow Answer

Fairness, according to behavioral economics,

Correct AnswerverifiedShow Answer

Time inconsistency refers to the phenomenon where your present self misjudges what your future self will do.

Correct AnswerverifiedShow Answer

Examples of precommitments to deal with people's time inconsistency problems include the following, except

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 Mickey would be most consistent with the findings of behavioral economists?

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 Mickey would be most consistent with the findings of behavioral economists?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Giving to Charity: Each year, U. S. char...
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