Question 1

The endowment effect makes people value things less when they think of those things as their own as opposed to identical things that are not theirs-as in "the grass is greener on the other side."

Accepted Answer

A) True 
 B)False

Question 2

What do neoclassical economics and behavioral economics believe about giving people options?

Accepted Answer

A)   Both believe that people make better decisions when they are given a greater set of options.
B)   Behavioral economics focuses on providing more options; neoclassical economics focuses on helping people make more rational decisions with the options available.
C)   Neoclassical economics focuses on providing more options; behavioral economics focuses on helping people make better decisions with the options available.
D)   Both believe that people are better off with fewer options, allowing them to spend more time calculating the benefits and costs of each available option.E) C) and D)
F) A) and C)

Question 3

Dictators/proposers tend to act more self-interested when playing the dictator game versus the ultimatum game.

Accepted Answer

A) True 
 B)False

Question 4

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

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

Question 6

When students end up doing "all-nighters" just to finish a term paper, it illustrates the

Accepted Answer

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

Question 7

According to prospect theory, people tend to favor default options. This is known as the

Accepted Answer

A)   self-serving bias.
B)   availability heuristic.
C)   status quo bias.
D)   framing bias.E) All of the above
F) B) and C)

Question 8

One major consequence of the overconfidence effect is that

Accepted Answer

A)   some people cannot correct a personal trait that might be causing them to fail in many ventures.
B)   someone could persist in pursuing a failed policy despite overwhelming evidence of the failure.
C)   bad decisions can be made because people will act without pausing to see whether their intuition is correct or not.
D)   some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments.E) A) and B)
F) None of the above

Question 9

Behavioral economics attempts to make better predictions about human behavior by combining insights from the following fields, except

Accepted Answer

A)   economics.
B)   biology.
C)   physics.
D)   psychology.E) B) and C)
F) A) and D)

Question 10

Which of the following statements best reflects how a behavioral economist views individual decision making?

Accepted Answer

A)   Alex makes wrong decisions sometimes, but usually it is only when he has been given bad information.
B)   Kara carefully calculates and weighs the expected benefits and costs of every option before making a decision.
C)   Alyssa may appear to care about others, but even her seemingly altruistic behaviors are really about furthering her own interests.
D)   Balin tries to make good, well-thought-out decisions, but his desire for utility in the present means that he often gives in to costly temptations.E) All of the above
F) A) and B)

Question 11

Which of the following is a significant difference in the behavior of the dictator/proposer between the dictator game and the ultimatum game?

Accepted Answer

A)   The dictator/proposer tends to be more generous in the ultimatum game.
B)   The dictator/proposer tends to be more generous in the dictator game.
C)   There is no systematic difference in the generosity of the dictator/proposer between the two games.
D)   Dictators/proposers demonstrate more emotion when playing the dictator game.E) A) and D)
F) A) and C)

Question 12

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

Question 13

Internationally, participation differences in organ donation programs are mostly attributed to

Accepted Answer

A)   cultural views.
B)   financial compensation for organ donors.
C)   what default option is set for participation or nonparticipation.
D)   living standards as measured by per capita GDP.E) C) and D)
F) A) and B)

Question 14

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

Question 15

Behavioral economists believe that people can be made better off by

Accepted Answer

A)   giving them more options, just like the belief of neoclassical economists.
B)   giving them more options, contrary to the belief of neoclassical economists.
C)   getting them to select better from the same set of options as they had initially.
D)   requiring them to follow an externally determined best choice among their options.E) A) and D)
F) All of the above

Question 16

Salary smoothing, automatic payroll deductions, and early withdrawal penalties are all examples of

Accepted Answer

A)   mechanisms imposed by companies to extract more from their workers and customers.
B)   policies that do not fundamentally alter decisions because they do not change the benefits or costs of an action.
C)   precommitments.
D)   hardwired heuristics.E) None of the above
F) B) and C)

Question 17

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

Question 18

Behavioral economics observes that people generally do not act according to their self-interest.

Accepted Answer

A) True 
 B)False

Question 19

One important consequence of the confirmation bias is that

Accepted Answer

A)   some people cannot correct a personal trait that might be causing them to fail in many ventures.
B)   someone could persist in pursuing a failed policy despite overwhelming evidence of the failure.
C)   bad decisions can be made because people will act without pausing to see whether their intuition is correct or not.
D)   some people may wrongly believe in their forecasting ability to predict future outcomes of risky investments.E) B) and C)
F) B) and D)

Question 20

Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a behavioral economist would expect Susie to

Accepted Answer

A)   carefully weigh the short-term benefits against the long-term costs and make a rational decision about how many treats to eat.
B)   eat more sugary treats than is optimal, as she likely gives more weight to present events and outcomes than to ones in the future.
C)   give away most of her sugary treats in an effort to resist temptation.
D)   compute the caloric intake and calculate how many hours of exercise would be needed to burn off the calories from each treat.E) C) and D)
F) B) and D)

Exam 8: Behavioral Economics

According to prospect theory, people tend to favor default options. This is known as the

Correct AnswerverifiedShow Answer

Which of the following is a significant difference in the behavior of the dictator/proposer between the dictator game and the ultimatum game?

Correct AnswerverifiedShow Answer

One important consequence of the confirmation bias is that

Correct AnswerverifiedShow Answer

According to behavioral economists, giving to charity

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements best reflects how a behavioral economist views individual decision making?

Correct AnswerverifiedShow Answer

Dictators/proposers tend to act more self-interested when playing the dictator game versus the ultimatum game.

Correct AnswerverifiedShow Answer

Behavioral economists believe that people can be made better off by

Correct AnswerverifiedShow Answer

Salary smoothing, automatic payroll deductions, and early withdrawal penalties are all examples of

Correct AnswerverifiedShow Answer

Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a behavioral economist would expect Susie to

Correct AnswerverifiedShow Answer

Behavioral economics attempts to make better predictions about human behavior by combining insights from the following fields, except

Correct AnswerverifiedShow Answer

Behavioral economics observes that people generally do not act according to their self-interest.

Correct AnswerverifiedShow Answer

One major consequence of the overconfidence effect is that

Correct AnswerverifiedShow Answer

What do neoclassical economics and behavioral economics believe about giving people options?

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

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

Correct AnswerverifiedShow Answer

Internationally, participation differences in organ donation programs are mostly attributed to

Correct AnswerverifiedShow Answer

When students end up doing "all-nighters" just to finish a term paper, it illustrates the

Correct AnswerverifiedShow Answer

The endowment effect makes people value things less when they think of those things as their own as opposed to identical things that are not theirs-as in "the grass is greener on the other side."

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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