Question 1

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) None of the above
F) All of the above

Question 2

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 to 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) None of the above
F) A) and D)

Question 3

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) None of the above
F) All of the above

Question 4

(Consider This) According to the piece "Wannamaker's Lament":

Accepted Answer

A)   price tags are inefficient signaling mechanisms.
B)   money-back guarantees are costly to firms because they don't increase sales but do increase costs.
C)   most marketing efforts have little impact on sales.
D)   only 50 percent of new consumer products fail within the first year.E) All of the above
F) A) and B)

Question 5

Suppose Gina and Henry play two rounds of the ultimatum game.In the first round they play for $10;in the second round they play for $1,000.In the first round Gina suggests an 80/20 split ($8 to Gina,$2 to Henry) ,but Henry quickly rejects the offer as unfair.Assuming Gina is interested in gaining financially from the experience and that she understands behavioral economics,we would expect her to:

Accepted Answer

A)   offer the same relative split ($800/$200) ,knowing that Henry will accept the offer because the dollar amount he would forgo by rejecting it is substantial.
B)   offer a more unequal split ($900/$100) in order to gain more for herself and figuring Henry will accept the split because $100 is better than nothing.
C)   offer a more equal split ($700/$300) to increase the probability that Henry will accept the offer.
D)   offer Henry more than half of the pot to ensure acceptance of the offer.E) B) and C)
F) A) and D)

Question 6

Placement of goods in grocery and other retail stores is often done with the objective of encouraging impulse buying.

Accepted Answer

A) True 
 B)False

Question 7

A key difference between neoclassical economics and behavioral economics is that in behavioral economics context affects preferences.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following best describes the relationship between market transactions and the ultimatum and dictator games?

Accepted Answer

A)   Market transactions operate more like the ultimatum game than the dictator game.
B)   Market transactions operate more like the dictator game than the ultimatum game.
C)   The ultimatum and dictator games both provide good representations of how market transactions work.
D)   Neither the ultimatum game nor the dictator game bears much similarity to market transactions.E) A) and B)
F) B) and D)

Question 9

Results of the ultimatum game:

Accepted Answer

A)   affirm the metaphor of the invisible hand.
B)   contradict the metaphor of the invisible hand.
C)   demonstrate that markets are generally inefficient.
D)   suggest that governments are unnecessary.E) B) and C)
F) B) and D)

Question 10

Alex was willing to pay $50 for the new World Cup soccer ball.When he received it as a gift,he was willing to sell it,but for no less than $80.According to behavioral economists:

Accepted Answer

A)   Alex's behavior is consistent with the endowment effect.
B)   Alex's behavior is irrational because of inconsistent anchoring.
C)   Alex should sell the ball if he's offered any amount over $50.
D)   Alex's behavior is irrational because his frame has changed.E) B) and C)
F) A) and D)

Question 11

Heuristics generally help people make fewer errors in their decisions.

Accepted Answer

A) True 
 B)False

Question 12

Last month Laura saw the value of her stock portfolio rise by $20,000.This month she saw the value of her portfolio decline by $20,000.According to behavioral economics:

Accepted Answer

A)   the positive utility Laura received from seeing her portfolio value rise was equal to the disutility she felt when its value declined.
B)   Laura should not invest in stocks unless the utility she receives from gains is at least as great as the disutility she feels from losses.
C)   the positive utility Laura received from seeing her portfolio value rise was greater than the disutility she felt when its value declined.
D)   the positive utility Laura received from seeing her portfolio value rise was less than the disutility she felt when its value declined.E) A) and D)
F) B) and C)

Question 13

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

Question 14

According to behavioral economics,placement of goods in retail stores is often designed to accomplish which of the following?

Accepted Answer

A)   Maximize impulse buying by consumers.
B)   Minimize shelving costs.
C)   Maximize convenience for customers.
D)   Maximize the amount of product the store can display.E) C) and D)
F) A) and C)

Question 15

In developing prospect theory,which of the following did behavioral economists not discover about people's reaction to goods and bads?

Accepted Answer

A)   People feel equivalent losses and gains in equal measure,supporting the assumption that consumers behave rationally.
B)   People are generally loss averse,feeling losses more intensely than gains.
C)   People judge good and bad outcomes relative to the status quo.
D)   People experience both diminishing marginal utility from gains and diminishing marginal disutility from losses.E) None of the above
F) A) and D)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Whenever Josh goes to his favorite restaurant,he wants to buy tiramisu,his favorite dessert.Despite the fact he would enjoy the flavor of the tiramisu the same amount every time,Josh only buys it when others are having dessert,and never buys it if he would be the only one having dessert.Behavioral economists would say that Josh's decision is affected by:

Accepted Answer

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

Question 18

Which of the following is the best example of a System 2 decision and action?

Accepted Answer

A)   Marty learns that his usual driving route to work will have significant delays due to construction but forgets and goes that way anyway.
B)   Doug eats a whole plate of nachos despite the fact it compromises his carefully planned diet.
C)   Bruce "goes with his gut" when choosing between two kinds of motorcycles to purchase.
D)   Chuck,who has contemplated a job change for a month and has other offers,chooses to quit when his boss makes him mad.E) None of the above
F) A) and B)

Question 19

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

Accepted Answer

A) True 
 B)False

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 to raising prices.E) B) and D)
F) None of the above

Exam 8: Behavioral Economics

Heuristics generally help people make fewer errors in their decisions.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

(Consider This) According to the piece "Wannamaker's Lament":

Correct Answer
verified

Correct Answer
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Alex was willing to pay $50 for the new World Cup soccer ball.When he received it as a gift,he was willing to sell it,but for no less than $80.According to behavioral economists:

Correct Answer
verified

A key difference between neoclassical economics and behavioral economics is that in behavioral economics context affects preferences.

Correct Answer
verified

According to behavioral economics,placement of goods in retail stores is often designed to accomplish which of the following?

Correct Answer
verified

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 Answer
verified

The threat of rejection in market transactions:

Correct Answer
verified

Which of the following best describes the relationship between market transactions and the ultimatum and dictator games?

Correct Answer
verified

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 to more likely but less publicized events.This phenomenon illustrates:

Correct Answer
verified

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

Correct Answer
verified

Placement of goods in grocery and other retail stores is often done with the objective of encouraging impulse buying.

Correct Answer
verified

Correct Answer
verified

Last month Laura saw the value of her stock portfolio rise by $20,000.This month she saw the value of her portfolio decline by $20,000.According to behavioral economics:

Correct Answer
verified

Results of the ultimatum game:

Correct Answer
verified

Anchoring:

Correct Answer
verified

In developing prospect theory,which of the following did behavioral economists not discover about people's reaction to goods and bads?

Correct Answer
verified

Which of the following is the best example of a System 2 decision and action?

Correct Answer
verified

Exam 8: Behavioral Economics

Heuristics generally help people make fewer errors in their decisions.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

(Consider This) According to the piece "Wannamaker's Lament":

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Alex was willing to pay $50 for the new World Cup soccer ball.When he received it as a gift,he was willing to sell it,but for no less than $80.According to behavioral economists:

Correct AnswerverifiedShow Answer

A key difference between neoclassical economics and behavioral economics is that in behavioral economics context affects preferences.

Correct AnswerverifiedShow Answer

According to behavioral economics,placement of goods in retail stores is often designed to accomplish which of the following?

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

The threat of rejection in market transactions:

Correct AnswerverifiedShow Answer

Which of the following best describes the relationship between market transactions and the ultimatum and dictator games?

Correct AnswerverifiedShow Answer

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 to more likely but less publicized events.This phenomenon illustrates:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Placement of goods in grocery and other retail stores is often done with the objective of encouraging impulse buying.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Last month Laura saw the value of her stock portfolio rise by $20,000.This month she saw the value of her portfolio decline by $20,000.According to behavioral economics:

Correct AnswerverifiedShow Answer

Results of the ultimatum game:

Correct AnswerverifiedShow Answer

Anchoring:

Correct AnswerverifiedShow Answer

In developing prospect theory,which of the following did behavioral economists not discover about people's reaction to goods and bads?

Correct AnswerverifiedShow Answer

Which of the following is the best example of a System 2 decision and action?

Correct AnswerverifiedShow Answer

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