Question 1

The presence of framing effects influences how sellers present their products to consumers.

Accepted Answer

A) True 
 B)False

Question 2

According to behavioral economists, someone suffering from myopia is most likely to

Accepted Answer

A)  spend too little on present consumption and save more than is necessary for the future.
B)  vote only for economic policies that serve his or her short- and long-term interests.
C)  rely too much on System 2 of the brain.
D)  spend too much on present consumption and not save enough for the future.E) All of the above
F) B) and C)

Question 3

The self-serving bias causes people to act only in their self-interest.

Accepted Answer

A) True 
 B)False

Question 4

When people believe murder is a more common cause of death than stomach cancer is, it illustrates the

Accepted Answer

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

Question 5

When the ultimatum game is played for larger rather than smaller amounts of money, behavioral economists have found that when the proposed splits are very uneven

Accepted Answer

A)  responders are much more likely to accept the offer because of the amount of money involved.
B)  responders are no more likely to accept the offer if they consider the split to be unfair.
C)  responders are much less likely to accept the offer, because their sense of unfairness is heightened with larger amounts of money.
D)  responders will accept offers at a higher rate but will exact greater emotional penalties on the proposer.E) A) and B)
F) A) and C)

Question 6

What three facts about people form the basis for prospect theory?

Accepted Answer

People judge good things and bad things ...

Question 7

According to behavioral economists, giving to charity

Accepted Answer

A)  contradicts the view that people are narrowly self-interested.
B)  appears unselfish but in fact is driven by self-interest.
C)  results from an ability to accurately calculate benefits and costs.
D)  is done solely to receive the utility from public recognition.E) B) and D)
F) All of the above

Question 8

When people retroactively believe that they had accurately foreseen past events, they are illustrating the

Accepted Answer

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

Question 9

What are the two reasons neoclassical economists give for making simplifying assumptions?

Accepted Answer

Neoclassical economists make simplifying...

Question 10

Suppose that Dairy Barn Foods produces a regular sour cream with 10 grams of fat per serving and a "low fat" sour cream with only 5 grams of fat per serving (assume that this is still considered a lot of fat to consume per serving) . According to prospect theory, how should Dairy Barn promote its "low fat" sour cream?

Accepted Answer

A)  It should make no mention of fat content, either in absolute terms or relative to its regular sour cream.
B)  It should advertise that the "low fat" sour cream has only "half the fat" of the regular sour cream.
C)  It should advertise that the "low fat" sour cream has only 5 grams of fat per serving.
D)  It won't matter what strategy Dairy Barn uses, as consumers are sufficiently informed as to not be affected by the advertising.E) All of the above
F) C) and D)

Question 11

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

Question 12

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 13

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

Question 14

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

Question 15

Neoclassical economics tends to make inaccurate predictions of human behavior in situations involving

Accepted Answer

A)  price changes.
B)  financial incentives.
C)  firms' profits.
D)  uncertainty and fairness.E) None of the above
F) A) and C)

Question 16

Behavioral economics recognizes that people use System 1 to make decisions more often than they use System 2. Which of the following is an implication of that decision-making process?

Accepted Answer

A)  A majority of decisions are not made according to the neoclassical assumption of rational behavior.
B)  Most decisions are made following a careful calculation of costs and benefits.
C)  Even though most decisions are irrational, the neoclassical model still accurately predicts outcomes.
D)  System 1 is best at making optimal decisions.E) C) and D)
F) B) and D)

Question 17

What are heuristics? How is this related to our decision-making processes?

Accepted Answer

Heuristics are the brain's mental shortc...

Question 18

The "hedonic treadmill" of prospect theory suggests that if people's incomes rise and stay at the new higher level, then their feelings of satisfaction also rise and stay at the new higher level.

Accepted Answer

A) True 
 B)False

Question 19

Some people's tendency to believe that they are better than average at making judgments or opinions is called the

Accepted Answer

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

Question 20

Anchoring

Accepted Answer

A)  can influence decision making with irrelevant information.
B)  explains why, for example, hamburger will be advertised as 80% lean rather than 20% fat.
C)  causes losses to be felt more intensely than gains.
D)  explains why, for example, firms prefer to reduce package sizes rather than raising prices.E) All of the above
F) None of the above

Exam 8: Behavioral Economics

Anchoring

Correct Answer
verified

Correct Answer
verified

According to behavioral economists, giving to charity

Correct Answer
verified

Behavioral economics recognizes that people use System 1 to make decisions more often than they use System 2. Which of the following is an implication of that decision-making process?

Correct Answer
verified

Scientists studying human behavior have found that people tend to

Correct Answer
verified

What three facts about people form the basis for prospect theory?

Correct Answer
verified
People judge good things and bad things ...
View 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 Answer
verified

What are heuristics? How is this related to our decision-making processes?

Correct Answer
verified
Heuristics are the brain's mental shortc...
View Answer

The presence of framing effects influences how sellers present their products to consumers.

Correct Answer
verified

The self-serving bias causes people to act only in their self-interest.

Correct Answer
verified

When people believe murder is a more common cause of death than stomach cancer is, it illustrates the

Correct Answer
verified

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 Answer
verified

Neoclassical economics tends to make inaccurate predictions of human behavior in situations involving

Correct Answer
verified

When people retroactively believe that they had accurately foreseen past events, they are illustrating the

Correct Answer
verified

According to behavioral economists, someone suffering from myopia is most likely to

Correct Answer
verified

Some people's tendency to believe that they are better than average at making judgments or opinions is called the

Correct Answer
verified

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 Answer
verified

When the ultimatum game is played for larger rather than smaller amounts of money, behavioral economists have found that when the proposed splits are very uneven

Correct Answer
verified

What are the two reasons neoclassical economists give for making simplifying assumptions?

Correct Answer
verified
Neoclassical economists make simplifying...
View Answer

The "hedonic treadmill" of prospect theory suggests that if people's incomes rise and stay at the new higher level, then their feelings of satisfaction also rise and stay at the new higher level.

Correct Answer
verified

Exam 8: Behavioral Economics

Anchoring

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to behavioral economists, giving to charity

Correct AnswerverifiedShow Answer

Behavioral economics recognizes that people use System 1 to make decisions more often than they use System 2. Which of the following is an implication of that decision-making process?

Correct AnswerverifiedShow Answer

Scientists studying human behavior have found that people tend to

Correct AnswerverifiedShow Answer

What three facts about people form the basis for prospect theory?

Correct AnswerverifiedPeople judge good things and bad things ...View AnswerShow 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

What are heuristics? How is this related to our decision-making processes?

Correct AnswerverifiedHeuristics are the brain's mental shortc...View AnswerShow Answer

The presence of framing effects influences how sellers present their products to consumers.

Correct AnswerverifiedShow Answer

The self-serving bias causes people to act only in their self-interest.

Correct AnswerverifiedShow Answer

When people believe murder is a more common cause of death than stomach cancer is, it illustrates the

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

Neoclassical economics tends to make inaccurate predictions of human behavior in situations involving

Correct AnswerverifiedShow Answer

When people retroactively believe that they had accurately foreseen past events, they are illustrating the

Correct AnswerverifiedShow Answer

According to behavioral economists, someone suffering from myopia is most likely to

Correct AnswerverifiedShow Answer

Some people's tendency to believe that they are better than average at making judgments or opinions is called the

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

When the ultimatum game is played for larger rather than smaller amounts of money, behavioral economists have found that when the proposed splits are very uneven

Correct AnswerverifiedShow Answer

What are the two reasons neoclassical economists give for making simplifying assumptions?

Correct AnswerverifiedNeoclassical economists make simplifying...View AnswerShow Answer

The "hedonic treadmill" of prospect theory suggests that if people's incomes rise and stay at the new higher level, then their feelings of satisfaction also rise and stay at the new higher level.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
People judge good things and bad things ...
View Answer

Correct Answer
verified

Correct Answer
verified
Heuristics are the brain's mental shortc...
View 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
Neoclassical economists make simplifying...
View Answer

Correct Answer
verified