Question 1

Suppose Faith and Mickey are playing both dictator and ultimatum games. Faith is the dictator/proposer and has $400 to allocate. Based on repeated experiments of the dictator and ultimatum games, what payouts to Faith would be most consistent with the findings of behavioral economists?

Accepted Answer

A)  Faith receives $400 from the dictator game and $350 from the ultimatum game.
B)  Faith receives $200 from the dictator game and $168 from the ultimatum game.
C)  Faith receives $200 from the dictator game and $200 from the ultimatum game.
D)  Faith receives $235 from the dictator game and $210 from the ultimatum game.E) B) and C)
F) A) and B)

Question 2

Behavioral economists believe that people

Accepted Answer

A)  assess current and future options equally well.
B)  do not care about fairness, especially if it impairs their ability to get what they want.
C)  make errors in decision making because of problems such as bad information, but such errors are random and generally not repeated by the same individual.
D)  often succumb to temptation.E) C) and D)
F) A) and B)

Question 3

Natural disasters often cause shortages of critical supplies. What outcomes would neoclassical and behavioral economics typically predict from these events?

Accepted Answer

A)  Both would expect prices to rise significantly, whether from market forces or from self-interest overwhelming any sense of compassion for others.
B)  Both would expect sellers to keep prices unchanged, whether to keep customers happy long-term or out of a sense of fairness.
C)  Neoclassical economists would expect economic chaos and collapse, while behavioral economists would expect everyone to act cooperatively.
D)  Neoclassical economists would expect prices to rise dramatically as a natural result of the greater scarcity, and behavioral economists would expect prices to increase less or not at all as people try not to take advantage of the situation.E) A) and B)
F) B) and C)

Question 4

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) None of the above
F) All of the above

Question 5

Regarding people's preferences, behavioral economists observe that these preferences are

Accepted Answer

A)  stable and not affected by context.
B)  fluid and easily influenced by framing.
C)  readily and accurately predictable.
D)  consistent from one period to the next.E) A) and B)
F) None of the above

Question 6

When people base their estimates of the likelihood of an event on how often they've heard of such an event, they illustrate the

Accepted Answer

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

Question 7

Many households in sunny cities are unwilling to invest in solar panels even though the investment would prove to be profitable in the future. What is the term for this problem? Explain.

Accepted Answer

The term is myopia. This means that peop...

Question 8

Because heuristics appear to be hardwired into the brain, the consequences include the following, except that

Accepted Answer

A)  it is sometimes difficult for people to correct detrimental behaviors or routines.
B)  people may be vulnerable to others who understand their hardwired tendencies.
C)  heuristics make people consistently behave in a rational manner.
D)  people may make behavioral changes if they're exposed to a situation where a heuristic kicks in and starts driving their decision.E) C) and D)
F) A) and C)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Why do cereals marketers most prefer to have their brand occupy the shelf-space a foot or two below a typical adult's eye-level?

Accepted Answer

A)  Because they know that adults typically look down when they go by the store shelves.
B)  Because that shelf-space is the lowest priced space they could occupy.
C)  Because it's a lot easier to restock those shelf-spaces.
D)  Because they are targeting the children who go shopping with adults.E) A) and D)
F) A) and C)

Question 11

The oft heard comment, "I knew it all along," illustrates the

Accepted Answer

A)  confirmation bias.
B)  framing effect.
C)  hindsight bias.
D)  self-serving bias.E) None of the above
F) B) and D)

Question 12

Provide an explanation from behavioral economics for why people tend to buy overpriced warranties for large consumer purchases such as a large-screen TVs.

Accepted Answer

People arbitrarily put certain options i...

Question 13

Behavioral economists believe that the human brain is generally

Accepted Answer

A)  efficient and accurate.
B)  efficient but prone to errors.
C)  inefficient but accurate.
D)  inefficient and prone to errors.E) C) and D)
F) A) and C)

Question 14

The dictator game and ultimatum game are experiments that have provided field evidence for

Accepted Answer

A)  the invisible hand.
B)  fairness.
C)  self-interest.
D)  cognitive biases.E) None of the above
F) A) and D)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Credit card companies put a low "minimum required payment" on people's bills in the hope that people will send in low payments, thereby allowing the card companies to earn more interest. The companies are trying to exploit the

Accepted Answer

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

Question 17

Riley has a new tennis racket for which she paid $75. Haley would like to buy the racket from Riley. Assuming Riley's decision is only influenced by the endowment effect, which of the following amounts would most likely represent how much Riley would have to receive to be willing to sell the racket?

Accepted Answer

A)  $75
B)  $100
C)  $50
D)  $20E) B) and C)
F) A) and B)

Question 18

"Heuristics" used by the human brain refer to the

Accepted Answer

A)  ability of the brain to make sophisticated and accurate mental processes.
B)  shortcuts that the brain uses in order to process information.
C)  elements in the brain that lead to consistent interpretation of all visual information.
D)  mental processes that burn and often waste a lot of energy.E) None of the above
F) A) and B)

Question 19

According to behavioral economics, the difficulty among many people to sufficiently save for their retirement is partly explained by

Accepted Answer

A)  myopia.
B)  mental accounting.
C)  anchoring.
D)  framing.E) A) and D)
F) All of the above

Question 20

Wall Street bosses who believed that the huge profits of their firms prior to the financial crisis that started in 2007 was their personal accomplishment and that the financial crisis was due to overregulation by government illustrates the

Accepted Answer

A)  confirmation bias.
B)  framing effect.
C)  hindsight bias.
D)  self-serving bias.E) B) and C)
F) None of the above

Exam 8: Behavioral Economics

Behavioral economists believe that people

Correct AnswerverifiedShow Answer

Because heuristics appear to be hardwired into the brain, the consequences include the following, except that

Correct AnswerverifiedShow Answer

Suppose Faith and Mickey are playing both dictator and ultimatum games. Faith is the dictator/proposer and has $400 to allocate. Based on repeated experiments of the dictator and ultimatum games, what payouts to Faith would be most consistent with the findings of behavioral economists?

Correct AnswerverifiedShow Answer

Provide an explanation from behavioral economics for why people tend to buy overpriced warranties for large consumer purchases such as a large-screen TVs.

Correct AnswerverifiedPeople arbitrarily put certain options i...View AnswerShow 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

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

Correct AnswerverifiedShow Answer

Wall Street bosses who believed that the huge profits of their firms prior to the financial crisis that started in 2007 was their personal accomplishment and that the financial crisis was due to overregulation by government illustrates the

Correct AnswerverifiedShow Answer

The dictator game and ultimatum game are experiments that have provided field evidence for

Correct AnswerverifiedShow Answer

"Heuristics" used by the human brain refer to the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Regarding people's preferences, behavioral economists observe that these preferences are

Correct AnswerverifiedShow Answer

Why do cereals marketers most prefer to have their brand occupy the shelf-space a foot or two below a typical adult's eye-level?

Correct AnswerverifiedShow Answer

The oft heard comment, "I knew it all along," illustrates the

Correct AnswerverifiedShow Answer

When people base their estimates of the likelihood of an event on how often they've heard of such an event, they illustrate the

Correct AnswerverifiedShow Answer

Many households in sunny cities are unwilling to invest in solar panels even though the investment would prove to be profitable in the future. What is the term for this problem? Explain.

Correct AnswerverifiedThe term is myopia. This means that peop...View AnswerShow Answer

Natural disasters often cause shortages of critical supplies. What outcomes would neoclassical and behavioral economics typically predict from these events?

Correct AnswerverifiedShow Answer

According to behavioral economics, the difficulty among many people to sufficiently save for their retirement is partly explained by

Correct AnswerverifiedShow Answer

Credit card companies put a low "minimum required payment" on people's bills in the hope that people will send in low payments, thereby allowing the card companies to earn more interest. The companies are trying to exploit the

Correct AnswerverifiedShow Answer

Behavioral economists believe that the human brain is generally

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
People arbitrarily put certain options i...
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
The term is myopia. This means that peop...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified