Chapter 8

Which of the following best explains the difference between neoclassical economics and behavioral economics
Neoclassical economics assumes that people are rational in their decision-making while behavioral economics believe people make systematic errors
Which of the following statements best reflects how a behavioral economist views individual decision making
Balin tries to make good well thought out decisions but his desire for utility and the present means that he often gives in to costly Temptations
According the o behavioral economist the human brain
Uses evolutionary developed heuristic to make many decisions
According to behavioral economics cognitive biases
Are misunderstandings or misperceptions that cause systematic errors
When people convince themselves that hey knew all along what was going to happen when in fact their predictions were incorrect they suffer from
Hindsight bias
Josh will receive a salary of $300,000 next year according to prospect theory
Josh satisfaction with that salary depends on how much she made in the past
Linda committed a traffic violation that resulted in an accident she learns first that the violation result in a $500 fine she then learns that she will have to pay another 500 for damage caused the accident according to prospect Theory
She will suffer less disutility from paying for the accident damage than from paying the fine
Eric tries to eat more healthfully by eliminating cookies donuts and similar snacks with his diet every day at work cover coworkers bring in those treats and Eric succumbs to temptation which of the following concepts with a behavioral economics used explain Eric self control problem
Time inconsistencies
Al regularly pays the full amount of taxes due even though he could easily hide some of his income and reduce his tax burden with no risk of getting caught according to behavioral economics
Fairness and other moral considerations cause Al to act contrary to his pure self interest
Which of the following is a significant difference in he behavior of he dictator proposer between the dictator game and he ultimatum game
The dictator proposer tends to be more generous in the ultimatum game
Which of the following sets of personal characteristics best reflects what behavioral economists assume about how people make decisions
People have preferences that depends on context a void
And are bad at computation often give into temptation and are often selfless in their behavior
Which of the following supermarket strategies to increase sales would be most consistent with the neo classical economics
Providing discounts for buying in bulk
Which of the following is not an implication of hardwired heuristics
Getting people to make better decisions for simply a matter of providing more information and more options
John’s friend Rosika Won a major lottery jackpot seeing this and despite the fact that millions don’t win and the odds of winning are intestinal John goes out and buys a bunch of lottery tickets despite struggling financially John’s decision about your lottery ticket under the circumstances would best be explained by the
Availability heuristic
Last month Laura saw the value of her stock portfolio by $20,000 this month she saw the value of her portfolio decline by $20,000 according to behavioral economics
The positive utility Laura received from seeing her portfolio value rise was less than the disutility she felt when it’s value declined
Alex was willing to pay $50 for the new world cup soccer ball when he received as a gift who is willing to sell it but for no less than $80 according to behavioral economist
Alex’s behavior is consistent with the endowment effect
According to behavioral economist people’s preferences toward a particular outcome
Depend heavily on the contextual information that defines whether that outcome is gain or a loss
Adam and Becky both recently started new jobs both have determined that they should save 10% of their monthly income total retirement Adams employer has no program established for payroll deduction but you could easily set up automatic withdraws to go into retirement funds but he’s a player automatically direct 8% of the paycheck into retirement funds but the employee could use the percent deducted behavioral economist would expect
Becky would save more as both would tend to stay at the defaults provided by their employers
Carlos and darla re playing the dictator game Carlos is assigned the role of dictator and given $20 to split between the two of them based on previous experiments with this game by behavioral economist which is the least likely outcome
Carlos will I have all the money to Darla
Results of the ultimatum game
From the metaphor of the invisible hand

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