Question 1

An application of behavioral economics is:

Accepted Answer

A)   price inconsistency.
B)   rational cost-price decision making.
C)   forgetting the fungibility of money.
D)   All of these are applications of behavioral economics.E) A) and D)
F) A) and C)

Question 2

Matt has $2000 saved for a trip at Spring Break.Over Christmas break he decides to spend $400 of it on gifts instead of putting the gifts on his credit card,thus avoiding interest charges.He gradually replaces it in his savings account over the next two months.An economist would say this behavior is:

Accepted Answer

A)   rational.
B)   irrational.
C)   utility minimizing.
D)   not observable.E) None of the above
F) C) and D)

Question 3

Economists believe that people who force themselves to always eat everything on their plate at a restaurant,regardless of how full they might feel,likely do so because:

Accepted Answer

A)   they gain negative utility from insulting the chef.
B)   they overvalue the opportunity costs of their health and time involved with eating food they don't really want.
C)   they include the sunk cost of their meals in making their decision.
D)   they undervalue the true benefit of eating too much.E) A) and B)
F) A) and C)

Question 4

Harry's employer offers a "Holiday Account," which means they will take $50 a month out of Harry's paycheck and deposit it into this account throughout the year.In December,they give Harry the money in the account to spend during the holidays.Harry regularly carries about $200 of credit card debt each month.Harry's decision to set aside some of his money in this account is an example of:

Accepted Answer

A)   ignoring the fungibility of money.
B)   recognizing that money is fungible.
C)   needing to categorize expenditures to make rational decisions about money.
D)   being rational.E) B) and C)
F) A) and B)

Question 5

When people change their minds about what they want simply because of the timing of the decision,economists refer to it as:

Accepted Answer

A)   time inconsistency.
B)   information overload paradox.
C)   cost-price inconsistency.
D)   time barriers to optimization.E) B) and D)
F) None of the above

Question 6

Jake brings his Xbox home over winter break and leaves it there,thinking he will study more in the spring without it around.Jake is:

Accepted Answer

A)   trying to compensate for the time-inconsistency of his desire to study more, but temptation to play video games instead.
B)   forcing his behavior to match economic theory.
C)   not acting rationally, since what he really wants is to play games all day.
D)   demonstrating that he has forgotten the fungibility of money.E) A) and B)
F) None of the above

Question 7

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

Question 8

In an effort to lose weight,Sam posts flyers all over town that offer a reward of $50 to anyone who catches him eating unhealthy food.Sam's flyers are an example of:

Accepted Answer

A)   a commitment device.
B)   price-optimization theory.
C)   the law of supply.
D)   a way to deal with inconsistent costs.E) B) and C)
F) C) and D)

Question 9

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

Question 10

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:

Accepted Answer

A)   he fell victim to the sunk-cost fallacy and should have ignored the fact that the $1000 was gone.
B)   he fell victim to the implicit-cost fallacy and should have ignored the fact that the $1000 was gone.
C)   he fell victim to the fungibility-fallacy and should not have gone on the trip.
D)   going on the trip was a utility-minimizing experience.E) A) and B)
F) A) and C)

Question 11

Economists believe that people who sit through bad music concerts likely do so because:

Accepted Answer

A)   they do not ignore the sunk cost involved.
B)   they undervalue the opportunity cost of their time.
C)   they don't accurately consider what else they could be doing with their time.
D)   All of these are true.E) A) and D)
F) A) and C)

Question 12

Carlos has been invited to go skiing for the afternoon with his friends.It will cost $40 for a lift ticket.It is likely Carlos will:

Accepted Answer

A)   overvalue the benefit of skiing.
B)   undervalue the opportunity cost of his afternoon.
C)   find it difficult to place a value on what he might do instead of skiing.
D)   All of these are true.E) A) and B)
F) B) and C)

Question 13

Behavioral economists recommend mechanisms to help people actually do things they say they want to do but often don't.Such mechanisms are often called

Accepted Answer

A)   savings rates.
B)   charitable donations.
C)   self-control.
D)   commitment devices.E) C) and D)
F) A) and D)

Question 14

An example of a fungible commodity is:

Accepted Answer

A)   oil.
B)   gold.
C)   aluminum.
D)   All of these are fungible commodities.E) B) and D)
F) C) and D)

Question 15

Mark has $2000 saved for a trip at Spring Break.Over Winter Break,he decide to buy gifts for his family and puts over $500 on his credit card which charges 10% interest on the outstanding balance every month.He pays off the credit card bill gradually over the next two months.An economist would categorize that behavior as:

Accepted Answer

A)   rational.
B)   irrational.
C)   misallocated.
D)   scarce.E) A) and B)
F) A) and C)

Question 16

The field of economics that draws on insights from psychology to expand models of individual decision making is called:

Accepted Answer

A)   psychological economics.
B)   behavioral economics.
C)   emotional economics.
D)   decision optimization economics.E) None of the above
F) C) and D)

Question 17

The fungibility of money means that

Accepted Answer

A)   the categories people create to organize their expenditures are meaningless in financial terms.
B)   people often create false distinctions between categories of debt.
C)   thinking large, one-time expenses should be paid off over a period of time, while everyday expenses should come out of your checking account, is irrational.
D)   All of these statements are true.E) C) and D)
F) A) and C)

Question 18

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

Accepted Answer

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

Question 19

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 not 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) B) and C)
F) A) and B)

Question 20

Sam has $500 saved up for his spring break.He also carries about $300 of debt on his credit card.By choosing not to pay off his credit card with his savings,Sam is:

Accepted Answer

A)   acting rationally.
B)   going to be poorer in the long run.
C)   recognizing that money is fungible.
D)   None of these is true.E) B) and C)
F) A) and B)

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

Correct Answer
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Correct Answer
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When people change their minds about what they want simply because of the timing of the decision,economists refer to it as:

Correct Answer
verified

Economists believe that people who sit through bad music concerts likely do so because:

Correct Answer
verified

Sam has $500 saved up for his spring break.He also carries about $300 of debt on his credit card.By choosing not to pay off his credit card with his savings,Sam is:

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

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 not 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

Correct Answer
verified

Correct Answer
verified

An example of a fungible commodity is:

Correct Answer
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Carlos has been invited to go skiing for the afternoon with his friends.It will cost $40 for a lift ticket.It is likely Carlos will:

Correct Answer
verified

The fungibility of money means that

Correct Answer
verified

Behavioral economists recommend mechanisms to help people actually do things they say they want to do but often don't.Such mechanisms are often called

Correct Answer
verified

The field of economics that draws on insights from psychology to expand models of individual decision making is called:

Correct Answer
verified

An application of behavioral economics is:

Correct Answer
verified

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

Correct Answer
verified

In an effort to lose weight,Sam posts flyers all over town that offer a reward of $50 to anyone who catches him eating unhealthy food.Sam's flyers are an example of:

Correct Answer
verified

Economists believe that people who force themselves to always eat everything on their plate at a restaurant,regardless of how full they might feel,likely do so because:

Correct Answer
verified

Jake brings his Xbox home over winter break and leaves it there,thinking he will study more in the spring without it around.Jake is:

Correct Answer
verified

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

Correct Answer
verified

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When people change their minds about what they want simply because of the timing of the decision,economists refer to it as:

Correct AnswerverifiedShow Answer

Economists believe that people who sit through bad music concerts likely do so because:

Correct AnswerverifiedShow Answer

Sam has $500 saved up for his spring break.He also carries about $300 of debt on his credit card.By choosing not to pay off his credit card with his savings,Sam is:

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

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 not 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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An example of a fungible commodity is:

Correct AnswerverifiedShow Answer

Carlos has been invited to go skiing for the afternoon with his friends.It will cost $40 for a lift ticket.It is likely Carlos will:

Correct AnswerverifiedShow Answer

The fungibility of money means that

Correct AnswerverifiedShow Answer

Behavioral economists recommend mechanisms to help people actually do things they say they want to do but often don't.Such mechanisms are often called

Correct AnswerverifiedShow Answer

The field of economics that draws on insights from psychology to expand models of individual decision making is called:

Correct AnswerverifiedShow Answer

An application of behavioral economics is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In an effort to lose weight,Sam posts flyers all over town that offer a reward of $50 to anyone who catches him eating unhealthy food.Sam's flyers are an example of:

Correct AnswerverifiedShow Answer

Economists believe that people who force themselves to always eat everything on their plate at a restaurant,regardless of how full they might feel,likely do so because:

Correct AnswerverifiedShow Answer

Jake brings his Xbox home over winter break and leaves it there,thinking he will study more in the spring without it around.Jake is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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