Question 1

A typical behavior that violates the assumption of rational behavior is:

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)   stubbornly watching to the end of a movie you've decided you're not enjoying at all.
D)   All of these demonstrate irrational behavior.E) A) and B)
F) All of the above

Question 2

People are especially prone to undervaluing opportunity costs when

Accepted Answer

A)   they are nonmonetary, such as time.
B)   they involve obvious costs, like lost wages.
C)   All of these are true.
D)   they are monetary.E) None of the above
F) A) and C)

Question 3

Beverly spends $100 on a teeth whitening kit.After one application,her gums are inflamed and it feels like her mouth is on fire.Beverly is trying to decide whether to apply the treatment again,or throw the kit away.The opportunity cost of a second application is:

Accepted Answer

A)   $100.
B)   the pain and suffering involved with the second application.
C)   $100 + the pain and suffering involved with the second application.
D)   $100 + the pain and suffering involved with the first and second application.E) B) and C)
F) A) and C)

Question 4

Jim bought a new bike and rides it every day,while his old one sits in the garage untouched.Jimâ€™s opportunity cost of keeping the old bike is:

Accepted Answer

A)   nothing, since he doesn't really value it anymore.
B)   whatever he could sell it for.
C)   whatever he would be willing to sell it for.
D)   All of these are true.E) A) and C)
F) A) and D)

Question 5

Someone saying that he wants to lose weight,but ordering dessert is an example of:

Accepted Answer

A)   rational decision making.
B)   rational behavior.
C)   irrational behavior.
D)   utility-maximizing behavior.E) A) and B)
F) A) and C)

Question 6

Behavioral economists recommend mechanisms that help 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)   Behavioral economists have not developed tools that help people with any of these.E) A) and D)
F) A) and B)

Question 7

Money is:

Accepted Answer

A)   the clearest example of something that is fungible.
B)   always recognized as fungible by individuals.
C)   more fungible in cash form versus as checking account balances.
D)   All of these are true.E) C) and D)
F) A) and D)

Question 8

In order to get children to eat all the food they've served,regardless of their hunger,mothers have relied for decades on the argument that "there are starving children in Africa." Assuming the presence of hungry children on another continent does not affect the utility you derive from the food on your plate,if you choose to force down food based on this argument,you are:

Accepted Answer

A)   acting rationally.
B)   caring more about starving children than your own well-being.
C)   acting irrationally.
D)   doing your part in the fight against world hunger.E) C) and D)
F) A) and B)

Question 9

Sandy is a big Star Wars fan and buys a $20 ticket a week in advance to the premier of the new movie.After arriving at the theater,she realizes she left the ticket at home and doesn't have time to return home and get it.Sandy can buy another ticket for $20.She decides not to because seeing the movie isn't worth $40 to her.This is an example of:

Accepted Answer

A)   rational behavior because she values the movie less than $40
B)   irrational behavior because she really values the movie more than $40
C)   irrational behavior because the initial $20 is a sunk cost.
D)   rational behavior because it is a commitment device to never forget a ticket at home again.E) None of the above
F) A) and B)

Question 10

In economics,choosing one activity means:

Accepted Answer

A)   choosing not to take advantage of another opportunity.
B)   people always act rationally.
C)   people signal they only like that activity.
D)   that activity must be observable to be studied.E) B) and C)
F) A) and C)

Question 11

Behavioral economists think that the less obvious a person's opportunity cost is:

Accepted Answer

A)   the harder it is to value accurately.
B)   the more likely they will undervalue it.
C)   the less likely they are to correctly value it.
D)   All of these are true.E) None of the above
F) C) and D)

Question 12

Putting money into mental categories can:

Accepted Answer

A)   cause people to take risks they wouldn't otherwise take.
B)   help people organize their expenditures.
C)   cause irrational behavior.
D)   All of these are true.E) C) and D)
F) A) and B)

Question 13

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

Accepted Answer

A)   have a difficult time accurately valuing the benefit of the movie.
B)   have a hard time accurately valuing her opportunity cost of the movie.
C)   over-value her opportunity cost.
D)   All of these are true.E) B) and D)
F) All of the above

Question 14

The implicit cost of ownership:

Accepted Answer

A)   is a cognitive bias.
B)   is an unproven concept.
C)   is the monetary opportunity cost that is often overlooked.
D)   All of these are true.E) A) and C)
F) B) and C)

Question 15

Stan complains to his roommate that he never has enough time to finish all the homework he's assigned,and his roommate tells him to quiet down because the first of the three movies they've planned to watch that day has begun.Stan's behavior demonstrates which economic concept?

Accepted Answer

A)   rational behavior
B)   time inconsistency
C)   chronologically challenged behavior
D)   time allocationE) None of the above
F) A) and D)

Question 16

Sunk costs are:

Accepted Answer

A)   costs that have been incurred and cannot be recovered.
B)   explicit costs that will incur large implicit costs to recoup or recover.
C)   costs that are upfront on a project and can be pulled out if the business goes under.
D)   the cost of recovering lost expenditures.E) B) and C)
F) A) and D)

Question 17

Which of the following is not a fungible commodity?

Accepted Answer

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

Question 18

Paul wins a $500 watch in a sweepstakes and decides to keep it,even though he says he would have preferred to win $500 cash.Knowing Paul's preferences,how can we explain his decision to keep it?

Accepted Answer

A)   Paul has a cognitive bias, and it leads him to value the watch more because he owns it.
B)   Paul has a cognitive bias; he is ignoring a nonmonetary opportunity cost of already owning the watch.
C)   Paul's implicit cost of ownership makes him feel as though he should keep the watch.
D)   All of these are true.E) B) and D)
F) A) and D)

Question 19

Applying the idea of time inconsistency,we can say that,in general,a person's "future-oriented self":

Accepted Answer

A)   has the same objectives as the person's present-oriented self, but articulates them differently.
B)   tends to choose healthier options, whereas the present-oriented self gives into temptation more easily.
C)   is less rational in decision-making, because that self rarely matches actual behavior.
D)   is more rational in decision-making, because its choices are generally healthier or more altruistic.E) All of the above
F) C) and D)

Question 20

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, 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 D)
F) A) and C)

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

Which of the following is not a fungible commodity?

Correct Answer
verified

Behavioral economists recommend mechanisms that help people:

Correct Answer
verified

People are especially prone to undervaluing opportunity costs when

Correct Answer
verified

A typical behavior that violates the assumption of rational behavior is:

Correct Answer
verified

Money is:

Correct Answer
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Stan complains to his roommate that he never has enough time to finish all the homework he's assigned,and his roommate tells him to quiet down because the first of the three movies they've planned to watch that day has begun.Stan's behavior demonstrates which economic concept?

Correct Answer
verified

Jim bought a new bike and rides it every day,while his old one sits in the garage untouched.Jimâ€™s opportunity cost of keeping the old bike is:

Correct Answer
verified

Correct Answer
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Beverly spends $100 on a teeth whitening kit.After one application,her gums are inflamed and it feels like her mouth is on fire.Beverly is trying to decide whether to apply the treatment again,or throw the kit away.The opportunity cost of a second application is:

Correct Answer
verified

Behavioral economists think that the less obvious a person's opportunity cost is:

Correct Answer
verified

Correct Answer
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Sunk costs are:

Correct Answer
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Carla is deciding whether to go to the movies this afternoon.Behavioral economists predict Carla likely will:

Correct Answer
verified

Applying the idea of time inconsistency,we can say that,in general,a person's "future-oriented self":

Correct Answer
verified

Someone saying that he wants to lose weight,but ordering dessert is an example of:

Correct Answer
verified

Paul wins a $500 watch in a sweepstakes and decides to keep it,even though he says he would have preferred to win $500 cash.Knowing Paul's preferences,how can we explain his decision to keep it?

Correct Answer
verified

In economics,choosing one activity means:

Correct Answer
verified

The implicit cost of ownership:

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

Putting money into mental categories can:

Correct Answer
verified

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

Which of the following is not a fungible commodity?

Correct AnswerverifiedShow Answer

Behavioral economists recommend mechanisms that help people:

Correct AnswerverifiedShow Answer

People are especially prone to undervaluing opportunity costs when

Correct AnswerverifiedShow Answer

A typical behavior that violates the assumption of rational behavior is:

Correct AnswerverifiedShow Answer

Money is:

Correct AnswerverifiedShow Answer

Stan complains to his roommate that he never has enough time to finish all the homework he's assigned,and his roommate tells him to quiet down because the first of the three movies they've planned to watch that day has begun.Stan's behavior demonstrates which economic concept?

Correct AnswerverifiedShow Answer

Jim bought a new bike and rides it every day,while his old one sits in the garage untouched.Jimâ€™s opportunity cost of keeping the old bike is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Beverly spends $100 on a teeth whitening kit.After one application,her gums are inflamed and it feels like her mouth is on fire.Beverly is trying to decide whether to apply the treatment again,or throw the kit away.The opportunity cost of a second application is:

Correct AnswerverifiedShow Answer

Behavioral economists think that the less obvious a person's opportunity cost is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Sunk costs are:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Applying the idea of time inconsistency,we can say that,in general,a person's "future-oriented self":

Correct AnswerverifiedShow Answer

Someone saying that he wants to lose weight,but ordering dessert is an example of:

Correct AnswerverifiedShow Answer

Paul wins a $500 watch in a sweepstakes and decides to keep it,even though he says he would have preferred to win $500 cash.Knowing Paul's preferences,how can we explain his decision to keep it?

Correct AnswerverifiedShow Answer

In economics,choosing one activity means:

Correct AnswerverifiedShow Answer

The implicit cost of ownership:

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

Putting money into mental categories can:

Correct AnswerverifiedShow Answer

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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