Question 1

Carla is deciding whether to go to the movie theater this afternoon. Behavioral economists predict Carla likely will:

Accepted Answer

A)  have a difficult time accurately valuing the benefit of seeing a movie.
B)  have a hard time accurately valuing her opportunity cost of seeing a movie.
C)  overvalue her opportunity cost of seeing a movie.
D)  All of these are correct.E) A) and D)
F) B) and C)

Question 2

Why isn't a sunk cost part of the opportunity cost of a decision?

Accepted Answer

A)  The expense would too often outweigh the benefits.
B)  The chances of recouping a sunk cost are exceedingly small.
C)  The money is gone, regardless of the decision made.
D)  Sunk costs are psychological and thus not a part of economic costs.E) All of the above
F) B) and C)

Question 3

Economists make the general assumption that:

Accepted Answer

A)  people are rational, but their behavior doesn't always follow this assumption.
B)  people are irrational, but there are some correlations in behavior that have been proven.
C)  people are rational, but this doesn't really ever resemble reality.
D)  people are irrational, but this is too difficult to put into a model.E) All of the above
F) B) and C)

Question 4

One concept that behavioral economists use to account for procrastination is:

Accepted Answer

A)  the time inconsistency of our decision-making.
B)  the fungibility of money.
C)  thinking inconsistently about prices.
D)  framing bias.E) All of the above
F) None of the above

Question 5

Which of the following demonstrates the assumption of rational behavior?

Accepted Answer

A)  Saying you want to lose weight but ordering dessert.
B)  Being willing to pay more for something if you use a credit card than if you use cash.
C)  Watching to the end of a movie that you're not enjoying at all.
D)  All of these demonstrate irrational behavior.E) A) and B)
F) A) and C)

Question 6

Lucas is having trouble keeping his spending within his budget. He decides to cancel his credit card and cuts up his ATM card. Each week he goes to the bank and withdraws only the amount of cash he has budgeted for the week. If he needs more money, he will have to make an extra trip to the bank. This behavior is an example of:

Accepted Answer

A)  increasing the cost of a vice.
B)  a commitment device.
C)  how people compensate for time-inconsistent decisions.
D)  All of these are correct.E) A) and C)
F) A) and D)

Question 7

Which of the following is a fungible commodity?

Accepted Answer

A)  Oil
B)  Gold
C)  Aluminum
D)  All of these are fungible commodities.E) All of the above
F) B) and C)

Question 8

Karina often plans to go to an aerobics class at the gym but ends up staying home and watching Netflix instead. She recently joined a gym that requires members to reserve a space in a class before attending. If a member has reserved a space, but does not show up for the class, a fine of $15 is charged to the member's account. This penalty scheme is designed to combat:

Accepted Answer

A)  commitment aversion.
B)  the sunk cost fallacy.
C)  time inconsistent behavior.
D)  the fungibility of money.E) None of the above
F) B) and D)

Question 9

A commitment device is:

Accepted Answer

A)  an arrangement an individual enters into to help fulfill a plan for future behavior that would otherwise be difficult.
B)  only effective if it is a legally enforceable contract.
C)  a mechanism that helps one individual commit another individual to a particular decision or plan.
D)  a strategy for overcoming the problem of undervaluing opportunity costs.E) A) and B)
F) A) and C)

Question 10

A behavioral economist might recommend a mechanism that helps people:

Accepted Answer

A)  find the lowest cost for items that maximize their utility.
B)  stick with choices they say they want to make, but often don't.
C)  enact utility-maximizing decisions based on complete information.
D)  None of these are actions for which a behavioral economist might recommend a mechanism.E) B) and C)
F) A) and D)

Question 11

In an effort to lose weight, Sam posts flyers all over town that offering 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) C) and D)
F) A) and D)

Question 12

Harry's employer offers a "Holiday Account," which $50 a month is taken out of Harry's paycheck and deposited into this account throughout the year. In December, Harry can take the money out of the account to spend during the holiday season. Harry regularly carries about $200 of credit card debt each month. Harry's decision to set aside some of his money in this account shows that he is:

Accepted Answer

A)  ignoring the fungibility of money.
B)  recognizing that money is fungible.
C)  categorizing expenditures to make rational decisions about money.
D)  being rational about the time value of his money.E) A) and C)
F) All of the above

Question 13

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)  an irrational choice.
B)  an opportunistic device.
C)  a commitment device.
D)  an irrational device.E) None of the above
F) B) and C)

Question 14

Kei's employer provides a free lunch for all employees on the last day of every month. Each employee can choose one sandwich, one drink, and one cookie. The cookie options are chocolate chip and oatmeal raisin. The opportunity cost of Kei choosing a chocolate chip cookie is:

Accepted Answer

A)  zero, because the cookie is free.
B)  the time it takes her to eat the cookie.
C)  the value she places on an oatmeal raisin cookie.
D)  the cost of the cookie paid by her employer.E) B) and C)
F) A) and D)

Question 15

Katarina receives two free passes to the waterpark for her birthday. She's not a huge fan of waterparks and would never buy such tickets for their face value of $90. A friend offers to buy the tickets from her at face value, but Katarina decides to use the tickets instead. Which of the following statements is true?
I. Katarina should have ignored the $90 sunk cost and sold the tickets.
II. The opportunity cost of keeping and using the tickets is $90.
III. In keeping the tickets, Kate ignored her implicit cost of owning the tickets.

Accepted Answer

A)  I only
B)  I and III only
C)  II and III only
D)  I, II, and IIIE) A) and B)
F) None of the above

Question 16

Behavioral economics uses concepts and theories from the field of _____ to explain _____, the systematic patterns in behavior that lead to consistently erroneous decisions.

Accepted Answer

A)  psychology; cognitive dissonances
B)  anthropology; disruptive biases
C)  anthropology; receptive biases
D)  psychology; cognitive biasesE) A) and B)
F) A) and C)

Question 17

When people forget about the fungibility of money:

Accepted Answer

A)  they may create categories to organize their expenditures, even if these categories are meaningless in financial terms.
B)  they are able to create important distinctions between categories of debt.
C)  they will be less susceptible to time inconsistent behavior.
D)  All of these are correct.E) A) and B)
F) A) and C)

Question 18

A consumer is likely to _____ his opportunity costs when they are _____.

Accepted Answer

A)  undervalue; not obvious
B)  undervalue; obvious
C)  overvalue; not obvious
D)  overvalue; obviousE) B) and C)
F) A) and B)

Question 19

Which of the following are examples of ignoring the fungibility of money?
I. Sitting through a bad movie because you've already paid for the ticket.
II. Charging an item to a high-interest credit card when you have the money available in a savings account.
III. Changing your mind about putting your current paycheck in a savings account and deciding to put your next paycheck toward savings instead.

Accepted Answer

A)  I and II only
B)  I and III only
C)  II only
D)  III onlyE) C) and D)
F) A) and B)

Question 20

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

Accepted Answer

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

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

Correct Answer
verified

Behavioral economics uses concepts and theories from the field of _ to explain _, the systematic patterns in behavior that lead to consistently erroneous decisions.

Correct Answer
verified

One concept that behavioral economists use to account for procrastination is:

Correct Answer
verified

Carla is deciding whether to go to the movie theater this afternoon. Behavioral economists predict Carla likely will:

Correct Answer
verified

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

Correct Answer
verified

When people forget about the fungibility of money:

Correct Answer
verified

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

Correct Answer
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Kei's employer provides a free lunch for all employees on the last day of every month. Each employee can choose one sandwich, one drink, and one cookie. The cookie options are chocolate chip and oatmeal raisin. The opportunity cost of Kei choosing a chocolate chip cookie is:

Correct Answer
verified

Correct Answer
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Which of the following is a fungible commodity?

Correct Answer
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Correct Answer
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Why isn't a sunk cost part of the opportunity cost of a decision?

Correct Answer
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Which of the following demonstrates the assumption of rational behavior?

Correct Answer
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A consumer is likely to _ his opportunity costs when they are _.

Correct Answer
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Economists make the general assumption that:

Correct Answer
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A commitment device is:

Correct Answer
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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

Correct Answer
verified

Correct Answer
verified

A behavioral economist might recommend a mechanism that helps people:

Correct Answer
verified

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

Correct AnswerverifiedShow Answer

Behavioral economics uses concepts and theories from the field of _____ to explain _____, the systematic patterns in behavior that lead to consistently erroneous decisions.

Correct AnswerverifiedShow Answer

One concept that behavioral economists use to account for procrastination is:

Correct AnswerverifiedShow Answer

Carla is deciding whether to go to the movie theater this afternoon. Behavioral economists predict Carla likely will:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When people forget about the fungibility of money:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Kei's employer provides a free lunch for all employees on the last day of every month. Each employee can choose one sandwich, one drink, and one cookie. The cookie options are chocolate chip and oatmeal raisin. The opportunity cost of Kei choosing a chocolate chip cookie is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is a fungible commodity?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Why isn't a sunk cost part of the opportunity cost of a decision?

Correct AnswerverifiedShow Answer

Which of the following demonstrates the assumption of rational behavior?

Correct AnswerverifiedShow Answer

A consumer is likely to _____ his opportunity costs when they are _____.

Correct AnswerverifiedShow Answer

Economists make the general assumption that:

Correct AnswerverifiedShow Answer

A commitment device is:

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A behavioral economist might recommend a mechanism that helps people:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Behavioral economics uses concepts and theories from the field of _ to explain _, the systematic patterns in behavior that lead to consistently erroneous decisions.

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
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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A consumer is likely to _ his opportunity costs when they are _.

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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