Question 1

Because gun violence is portrayed frequently on television and in movies, people mistakenly assign too high of a probability that they will fall victim to gun violence and too low of a probability of suffering from more likely but less publicized events. This phenomenon illustrates

Accepted Answer

A)  the effect of the availability heuristic.
B)  that people suffer from hindsight bias.
C)  that events are poorly framed by the media.
D)  the self-serving bias at work.E) A) and C)
F) A) and D)

Question 2

In sunny parts of the country, solar panels generate net financial benefits in just a few years, despite having high installation costs. Despite their long-run profitability, the high upfront costs discourage many from installing solar panels. From a behavioral economics perspective, this is the result of

Accepted Answer

A)  myopia.
B)  time inconsistency.
C)  status quo bias.
D)  the endowment effect.E) A) and D)
F) C) and D)

Question 3

Which of the following is not an implication of hardwired heuristics?

Accepted Answer

A)  Getting people to make positive behavioral changes is about putting them in situations where heuristics kick in and lead them to the desired outcome.
B)  Getting people to make better decisions is simply a matter of providing more information and more options.
C)  People who know and understand hardwired tendencies of others can take advantage of situations.
D)  Even when confronted with irrefutable information that a behavior is detrimental, people still may not change what they're doing.E) None of the above
F) All of the above

Question 4

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

Question 5

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

Question 6

That people tend to hold on to shares of stock well past the point where it makes sense to sell those shares can be explained in part by the

Accepted Answer

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

Question 7

Precommitments are a tool designed to overcome time inconsistency.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following cognitive biases refers to people's tendency to attribute their successes to personal ability and effort, and failures to forces outside their control?

Accepted Answer

A)  overconfidence effect
B)  confirmation bias
C)  self-serving bias
D)  hindsight biasE) All of the above
F) None of the above

Question 9

Suppose Ryan and Rita were randomly shown the numbers 25 and 67, respectively, and then asked to estimate the price of an item about which they have relatively limited knowledge. According to findings from behavioral economics, we would expect

Accepted Answer

A)  Ryan to estimate a price higher than what Rita would estimate.
B)  Ryan to estimate a price lower than what Rita would estimate.
C)  Ryan to estimate a price about the same as what Rita would estimate.
D)  the randomly shown numbers to have no influence on their estimates.E) All of the above
F) B) and D)

Question 10

The BIT helped poor people in the Philippines increase their saving by offering "commitment" savings accounts that restricted withdrawals until certain dates or savings targets were reached. This is an example of

Accepted Answer

A)  a nudge.
B)  anchoring.
C)  mental accounting.
D)  endowment effects.E) A) and D)
F) A) and C)

Question 11

Neoclassical economics does not hold which of the following assumptions?

Accepted Answer

A)  People are fundamentally rational.
B)  People can make errors initially, but they learn quickly.
C)  People's errors are random and rare.
D)  People make regularly repeated mistakes.E) All of the above
F) A) and B)

Question 12

Why do credit card companies typically require small minimum payment amounts on their customers' monthly credit card statements?

Accepted Answer

A)  Credit card companies are concerned that their customers will be put in financial distress if required to make higher payments.
B)  Credit card companies want to promote faster repayment, and customers will be encouraged to pay more each month if they're able to pay well beyond the minimum.
C)  Credit card companies want to increase profits by promoting slower repayment, and actual customer payments will be anchored by the smaller payment requirements.
D)  Credit card companies actually charge the highest minimum payment they are allowed by law to charge.E) C) and D)
F) B) and D)

Question 13

Behavioral economists have found that one major explanation for the intercountry differences in participation rates in organ-donation programs is

Accepted Answer

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

Question 14

Behavioral economic theories are developed based on the following, except

Accepted Answer

A)  assuming that people always make rational decisions and choices.
B)  observing people's actual behavior, including irrational behavior.
C)  trying to explain people's tendency to make systematic errors in certain situations.
D)  dropping the neoclassical assumption that people are fundamentally rational.E) All of the above
F) A) and B)

Question 15

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) B) and D) C

Question 16

Between System 1 and System 2 in the brain, System 1 makes most of the decisions.

Accepted Answer

A) True 
 B)False

Question 17

Augi carefully plans out an early morning exercise routine to lose weight and get fit. When it's time to work out, however, Augi just "doesn't feel up to it" and decides to sleep in. Behavioral economics would say that Augi

Accepted Answer

A)  weighed the costs and benefits and made a rational economic decision to sleep in.
B)  used System 1 of her brain to formulate her workout plan, but then gave in to System 2 when she chose to sleep in.
C)  used System 2 of her brain to formulate her workout plan, but then gave in to System 1 when she chose to sleep in.
D)  is fundamentally lazy and incapable of sticking to a workout plan.E) None of the above
F) A) and B) C

Question 18

Rosa received a corgi pillow as a raffle prize; she would have been willing to pay $20 to buy it herself. Based on the endowment effect, we would expect Rosa to be willing to sell the pillow

Accepted Answer

A)  for some amount less than $20.
B)  only if she is offered more than $20.
C)  for the $20 she would have been willing to pay for the pillow.
D)  under no circumstances whatsoever.E) A) and B)
F) A) and C)

Question 19

John's friend Rosika won a major lottery jackpot. Seeing this, John goes out and buys a bunch of lottery tickets despite struggling financially and even though he knows that millions don't win and that the odds of winning are infinitesimal. John's decision to buy the lottery tickets under these circumstances would best be explained by the

Accepted Answer

A)  hindsight bias.
B)  self-serving bias.
C)  confirmation bias.
D)  availability heuristic.E) A) and C)
F) A) and D) D

Question 20

"Nudges" refer to

Accepted Answer

A)  subtle changes in policies or practices that result in large behavioral changes.
B)  legal changes made without much publicity that require significant changes in behavior.
C)  coercion by governmental authorities.
D)  changes in endowments that significantly alter behavior.E) None of the above
F) A) and B)

Exam 8: Behavioral Economics

Because gun violence is portrayed frequently on television and in movies, people mistakenly assign too high of a probability that they will fall victim to gun violence and too low of a probability of suffering from more likely but less publicized events. This phenomenon illustrates

Correct Answer
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Correct Answer
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Which of the following is not an implication of hardwired heuristics?

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

Correct Answer
verified

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

Correct Answer
verified

That people tend to hold on to shares of stock well past the point where it makes sense to sell those shares can be explained in part by the

Correct Answer
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Precommitments are a tool designed to overcome time inconsistency.

Correct Answer
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Which of the following cognitive biases refers to people's tendency to attribute their successes to personal ability and effort, and failures to forces outside their control?

Correct Answer
verified

Suppose Ryan and Rita were randomly shown the numbers 25 and 67, respectively, and then asked to estimate the price of an item about which they have relatively limited knowledge. According to findings from behavioral economics, we would expect

Correct Answer
verified

The BIT helped poor people in the Philippines increase their saving by offering "commitment" savings accounts that restricted withdrawals until certain dates or savings targets were reached. This is an example of

Correct Answer
verified

Neoclassical economics does not hold which of the following assumptions?

Correct Answer
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Why do credit card companies typically require small minimum payment amounts on their customers' monthly credit card statements?

Correct Answer
verified

Behavioral economists have found that one major explanation for the intercountry differences in participation rates in organ-donation programs is

Correct Answer
verified

Behavioral economic theories are developed based on the following, except

Correct Answer
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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
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C

Between System 1 and System 2 in the brain, System 1 makes most of the decisions.

Correct Answer
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Augi carefully plans out an early morning exercise routine to lose weight and get fit. When it's time to work out, however, Augi just "doesn't feel up to it" and decides to sleep in. Behavioral economics would say that Augi

Correct Answer
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C

Rosa received a corgi pillow as a raffle prize; she would have been willing to pay $20 to buy it herself. Based on the endowment effect, we would expect Rosa to be willing to sell the pillow

Correct Answer
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Correct Answer
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D

"Nudges" refer to

Correct Answer
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Exam 8: Behavioral Economics

Because gun violence is portrayed frequently on television and in movies, people mistakenly assign too high of a probability that they will fall victim to gun violence and too low of a probability of suffering from more likely but less publicized events. This phenomenon illustrates

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not an implication of hardwired heuristics?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

That people tend to hold on to shares of stock well past the point where it makes sense to sell those shares can be explained in part by the

Correct AnswerverifiedShow Answer

Precommitments are a tool designed to overcome time inconsistency.

Correct AnswerverifiedShow Answer

Which of the following cognitive biases refers to people's tendency to attribute their successes to personal ability and effort, and failures to forces outside their control?

Correct AnswerverifiedShow Answer

Suppose Ryan and Rita were randomly shown the numbers 25 and 67, respectively, and then asked to estimate the price of an item about which they have relatively limited knowledge. According to findings from behavioral economics, we would expect

Correct AnswerverifiedShow Answer

The BIT helped poor people in the Philippines increase their saving by offering "commitment" savings accounts that restricted withdrawals until certain dates or savings targets were reached. This is an example of

Correct AnswerverifiedShow Answer

Neoclassical economics does not hold which of the following assumptions?

Correct AnswerverifiedShow Answer

Why do credit card companies typically require small minimum payment amounts on their customers' monthly credit card statements?

Correct AnswerverifiedShow Answer

Behavioral economists have found that one major explanation for the intercountry differences in participation rates in organ-donation programs is

Correct AnswerverifiedShow Answer

Behavioral economic theories are developed based on the following, except

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 AnswerverifiedC

Between System 1 and System 2 in the brain, System 1 makes most of the decisions.

Correct AnswerverifiedShow Answer

Augi carefully plans out an early morning exercise routine to lose weight and get fit. When it's time to work out, however, Augi just "doesn't feel up to it" and decides to sleep in. Behavioral economics would say that Augi

Correct AnswerverifiedC

Rosa received a corgi pillow as a raffle prize; she would have been willing to pay $20 to buy it herself. Based on the endowment effect, we would expect Rosa to be willing to sell the pillow

Correct AnswerverifiedShow Answer

Correct AnswerverifiedD

"Nudges" refer to

Correct AnswerverifiedShow Answer

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C

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C

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D

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