Question 1

Behavioral economics creates economic tools and theories to explain the systematic patterns in how we behave that lead to consistently erroneous decisions.These patterns are called:

Accepted Answer

A)  cognitive biases in the field of psychology.
B)  cognitive dissonance in the field of psychology.
C)  disruptive biases in the field of anthropology.
D)  receptive biases in the field of anthropology.E) B) and D)
F) A) and D) A

Question 2

Patti buys a new kind of cereal to try even though it's more expensive than her favorite kind.After a single bowl,Patti decides she does not care for the new cereal at all,and she:

Accepted Answer

A)  forces herself to finish it,because she irrationally considers the sunk cost of the cereal.
B)  throws it away,because she irrationally spent money on something she had no information about.
C)  forces herself to finish it,because she rationally prices out the cost per bowl.
D)  None of these is likely to happen for the reason stated.E) None of the above
F) All of the above A

Question 3

Brett desperately wants to quit smoking,but just can't seem to do it on his own.So,he tells his friends that he will pay them $20 each time they catch him smoking.This agreement with Brett's friends is an example of:

Accepted Answer

A)  a way to increase the cost of his vice.
B)  an incentive to help Brett quit,which is what he really wants to do.
C)  a commitment device.
D)  All of these are true.E) All of the above
F) None of the above D

Question 4

Walter rents some ice time at the local hockey rink for 2 hours.After skating for an hour,he finds himself cold,tired,and hungry.If Walter decides to skate around for the other hour before leaving,it is likely because he:

Accepted Answer

A)  is ignoring the sunk cost of the rink time.
B)  is considering the sunk cost of the rink time.
C)  is weighing his opportunity costs of the second hour against the benefits of the second hour of skating.
D)  None of these is true.E) B) and D)
F) B) and C)

Question 5

Which of the following is not a fungible commodity?

Accepted Answer

A)  Oil paintings
B)  Electricity
C)  Silver
D)  All of these are fungible commodities.E) A) and B)
F) A) and C)

Question 6

Claire bought a new TV,and the old one sits in her basement untouched.If Claire were rational,what would she do with the old TV?

Accepted Answer

A)  Throw it away because she doesn't really value it anymore.
B)  Sell it for its market value of $100,because that is the opportunity cost of having it sit in her basement.
C)  Give it away,because it is worth more to someone else than Claire.
D)  Either sell it for the value of her new TV or keep it.E) B) and C)
F) A) and D)

Question 7

In economics,we assume rational decisions are made when individuals weigh:

Accepted Answer

A)  the opportunity costs versus the benefits of an action.
B)  the sunk costs versus the benefits of an action.
C)  the sunk costs versus the opportunity costs of an action.
D)  the opportunity and sunk costs versus the benefits of an action.E) All of the above
F) A) and C)

Question 8

The idea of time inconsistency explains procrastination through:

Accepted Answer

A)  recognizing we have two modes of decision making,a "future-oriented" and a "present-oriented" self,who have conflicting objectives.
B)  recognizing we have several modes of decision making,and the less time we have to react,the worse the decision is.
C)  recognizing that our ability to remember long-term benefits when making decisions diminishes the closer the action becomes.
D)  recognizing that we never take long-term benefits into account.E) B) and C)
F) A) and D)

Question 9

An example of someone who irrationally considers sunk costs when making a decision is most likely:

Accepted Answer

A)  someone who paid $50 for a ticket to a baseball game and ends up sitting through the entire game in the freezing rain without a jacket.
B)  a family that pays $20 to enter a state park for the day and leaves after an hour.
C)  a family that pays $20 to enter a state park for the day and stays all day.
D)  someone who paid $50 for a ticket to a baseball game and ends up sitting through the entire game enjoying himself.E) B) and C)
F) None of the above

Question 10

Not buying junk food while doing the weekly shopping and forcing an extra trip to the store to acquire it is an example of:

Accepted Answer

A)  increasing the cost of a vice.
B)  the law of demand.
C)  how people compensate for time-inconsistent decisions.
D)  All of these are true.E) All of the above
F) A) and C)

Question 11

Behavioral economics:

Accepted Answer

A)  draws on insights from psychology to expand models of individual decision making.
B)  draws on insights from anthropology to clarify models of individual decision making.
C)  draws on insights from business theory to expand models of household behavior.
D)  is the least disputed field of economics.E) A) and D)
F) A) and B)

Question 12

Michelle is spending the day at the mall with friends.She sees a cute pair of shoes on sale for $40 and is considering her opportunity cost of buying them.She will likely:

Accepted Answer

A)  have an easier time valuing the benefit of the shoes than the opportunity cost.
B)  have an easier time valuing the opportunity cost of the shoes than their benefit.
C)  not buy them since she can think of thousands of other ways to spend the $40.
D)  buy them and lose surplus.E) B) and C)
F) A) and D)

Question 13

Beth really wants to get in shape,but just can't seem to ever get herself to the gym.An example of a commitment device Beth could use would be:

Accepted Answer

A)  to pack her gym bag the night before and force herself to carry it with her all day.
B)  to allow herself one dessert for each visit to the gym.
C)  to make arrangements to meet with an exercise buddy every day at the gym to work out together.
D)  None of these is a commitment device.E) B) and D)
F) A) and D)

Question 14

Rick finds a great Internet deal on an all-inclusive vacation rental in the Tropics for $1200,and immediately places a $1000 nonrefundable deposit on it.He later learns that the dates he planned to go are right in the middle of hurricane season,and it is likely to be miserable and potentially dangerous weather the entire time.Rick decides he cannot waste the $1000 and takes the trip anyway.While sitting in the rain,miserable,Rick realizes he should have been more rational and:

Accepted Answer

A)  ignored his sunk cost of $1000.
B)  ignored his sunk cost of $1200.
C)  considered his sunk cost of $1000.
D)  considered his sunk cost of $200.E) None of the above
F) C) and D)

Question 15

Dale just won tickets to see a NASCAR race.His coworker offers to pay him $200 for them,but Dale decides to use them,even though he would never pay $200 for them himself.Dale's willingness to consume $200 worth of tickets that he doesn't value at $200 is attributed to:

Accepted Answer

A)  the explicit cost of ownership.
B)  the high fungibility of money.
C)  his refusal to ignore the sunk cost of the tickets.
D)  None of these is correct.E) C) and D)
F) B) and D)

Question 16

Which of the following is an example of a fungible commodity?

Accepted Answer

A)  Picasso paintings
B)  Houses
C)  Live concerts
D)  None of these is a fungible commodity.E) None of the above
F) A) and D)

Question 17

After enjoying a perfectly delicious meal,Duane treats himself and orders a very expensive dessert.After one bite,Duane realizes he does not care for it at all.He chokes it down while thinking about the money he just wasted on it.Duane's decision to eat the entire dessert is an example of:

Accepted Answer

A)  irrational behavior.
B)  a cognitive bias,because he is focused on the money spent on the dessert.
C)  considering a sunk cost instead of weighing marginal costs and benefits.
D)  Duane's behavior exemplifies all of these.E) B) and C)
F) A) and D)

Question 18

Christopher just won tickets to see an NFL football game.His coworker offers to pay him $300 for them,but Christopher decides to use them,even though he would never pay $300 for them himself.Christopher's willingness to consume $300 worth of tickets that he doesn't value at $300 is attributed to:

Accepted Answer

A)  the implicit cost of ownership.
B)  the high transactions costs involved in selling the tickets.
C)  his refusal to ignore the sunk cost of the tickets.
D)  None of these is correct.E) None of the above
F) B) and C)

Question 19

Scott and Tom have dinner together.When both decide they are full,Scott forces himself to finish the rest of the food on his plate even though he doesn't really want to,while Tom scrapes what's left on his plate into the garbage.How might an economist explain this behavior?

Accepted Answer

A)  Scott acted rationally,because the food otherwise would have been thrown away.
B)  Tom acted rationally,maximizing his utility.
C)  Both Tom and Scott acted rationally.
D)  Both Tom and Scott acted irrationally.E) A) and B)
F) A) and C)

Question 20

Behavioral economists have developed tools to help people actually do things they say they want to do but often don't,such as:

Accepted Answer

A)  save more money.
B)  donate more to charity.
C)  live a healthier lifestyle.
D)  All of these are things people say they want to do but often don't.E) None of the above
F) All of the above

Exam 8: Behavioral Economics: A Closer Look at Decision Making

Behavioral economics creates economic tools and theories to explain the systematic patterns in how we behave that lead to consistently erroneous decisions.These patterns are called:

Correct Answer
verified
A

Patti buys a new kind of cereal to try even though it's more expensive than her favorite kind.After a single bowl,Patti decides she does not care for the new cereal at all,and she:

Correct Answer
verified
A

Brett desperately wants to quit smoking,but just can't seem to do it on his own.So,he tells his friends that he will pay them $20 each time they catch him smoking.This agreement with Brett's friends is an example of:

Correct Answer
verified
D

Walter rents some ice time at the local hockey rink for 2 hours.After skating for an hour,he finds himself cold,tired,and hungry.If Walter decides to skate around for the other hour before leaving,it is likely because he:

Correct Answer
verified

Which of the following is not a fungible commodity?

Correct Answer
verified

Claire bought a new TV,and the old one sits in her basement untouched.If Claire were rational,what would she do with the old TV?

Correct Answer
verified

In economics,we assume rational decisions are made when individuals weigh:

Correct Answer
verified

The idea of time inconsistency explains procrastination through:

Correct Answer
verified

An example of someone who irrationally considers sunk costs when making a decision is most likely:

Correct Answer
verified

Not buying junk food while doing the weekly shopping and forcing an extra trip to the store to acquire it is an example of:

Correct Answer
verified

Behavioral economics:

Correct Answer
verified

Michelle is spending the day at the mall with friends.She sees a cute pair of shoes on sale for $40 and is considering her opportunity cost of buying them.She will likely:

Correct Answer
verified

Beth really wants to get in shape,but just can't seem to ever get herself to the gym.An example of a commitment device Beth could use would be:

Correct Answer
verified

Correct Answer
verified

Dale just won tickets to see a NASCAR race.His coworker offers to pay him $200 for them,but Dale decides to use them,even though he would never pay $200 for them himself.Dale's willingness to consume $200 worth of tickets that he doesn't value at $200 is attributed to:

Correct Answer
verified

Which of the following is an example of a fungible commodity?

Correct Answer
verified

After enjoying a perfectly delicious meal,Duane treats himself and orders a very expensive dessert.After one bite,Duane realizes he does not care for it at all.He chokes it down while thinking about the money he just wasted on it.Duane's decision to eat the entire dessert is an example of:

Correct Answer
verified

Christopher just won tickets to see an NFL football game.His coworker offers to pay him $300 for them,but Christopher decides to use them,even though he would never pay $300 for them himself.Christopher's willingness to consume $300 worth of tickets that he doesn't value at $300 is attributed to:

Correct Answer
verified

Scott and Tom have dinner together.When both decide they are full,Scott forces himself to finish the rest of the food on his plate even though he doesn't really want to,while Tom scrapes what's left on his plate into the garbage.How might an economist explain this behavior?

Correct Answer
verified

Behavioral economists have developed tools to help people actually do things they say they want to do but often don't,such as:

Correct Answer
verified

Exam 8: Behavioral Economics: A Closer Look at Decision Making

Behavioral economics creates economic tools and theories to explain the systematic patterns in how we behave that lead to consistently erroneous decisions.These patterns are called:

Correct AnswerverifiedA

Patti buys a new kind of cereal to try even though it's more expensive than her favorite kind.After a single bowl,Patti decides she does not care for the new cereal at all,and she:

Correct AnswerverifiedA

Brett desperately wants to quit smoking,but just can't seem to do it on his own.So,he tells his friends that he will pay them $20 each time they catch him smoking.This agreement with Brett's friends is an example of:

Correct AnswerverifiedD

Walter rents some ice time at the local hockey rink for 2 hours.After skating for an hour,he finds himself cold,tired,and hungry.If Walter decides to skate around for the other hour before leaving,it is likely because he:

Correct AnswerverifiedShow Answer

Which of the following is not a fungible commodity?

Correct AnswerverifiedShow Answer

Claire bought a new TV,and the old one sits in her basement untouched.If Claire were rational,what would she do with the old TV?

Correct AnswerverifiedShow Answer

In economics,we assume rational decisions are made when individuals weigh:

Correct AnswerverifiedShow Answer

The idea of time inconsistency explains procrastination through:

Correct AnswerverifiedShow Answer

An example of someone who irrationally considers sunk costs when making a decision is most likely:

Correct AnswerverifiedShow Answer

Not buying junk food while doing the weekly shopping and forcing an extra trip to the store to acquire it is an example of:

Correct AnswerverifiedShow Answer

Behavioral economics:

Correct AnswerverifiedShow Answer

Michelle is spending the day at the mall with friends.She sees a cute pair of shoes on sale for $40 and is considering her opportunity cost of buying them.She will likely:

Correct AnswerverifiedShow Answer

Beth really wants to get in shape,but just can't seem to ever get herself to the gym.An example of a commitment device Beth could use would be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Dale just won tickets to see a NASCAR race.His coworker offers to pay him $200 for them,but Dale decides to use them,even though he would never pay $200 for them himself.Dale's willingness to consume $200 worth of tickets that he doesn't value at $200 is attributed to:

Correct AnswerverifiedShow Answer

Which of the following is an example of a fungible commodity?

Correct AnswerverifiedShow Answer

After enjoying a perfectly delicious meal,Duane treats himself and orders a very expensive dessert.After one bite,Duane realizes he does not care for it at all.He chokes it down while thinking about the money he just wasted on it.Duane's decision to eat the entire dessert is an example of:

Correct AnswerverifiedShow Answer

Christopher just won tickets to see an NFL football game.His coworker offers to pay him $300 for them,but Christopher decides to use them,even though he would never pay $300 for them himself.Christopher's willingness to consume $300 worth of tickets that he doesn't value at $300 is attributed to:

Correct AnswerverifiedShow Answer

Scott and Tom have dinner together.When both decide they are full,Scott forces himself to finish the rest of the food on his plate even though he doesn't really want to,while Tom scrapes what's left on his plate into the garbage.How might an economist explain this behavior?

Correct AnswerverifiedShow Answer

Behavioral economists have developed tools to help people actually do things they say they want to do but often don't,such as:

Correct AnswerverifiedShow Answer

Correct Answer
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D

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