Q&A Hero

Q: A ________ effect occurs when an answer depends on how a question is asked or when a decision is influenced by the way alternatives are presented. a. framing d. priming b. hot-hand e. behaviorist c. Hayekian

Q: Titus and Lauren are playing a coin-tossing game where each player tosses a fair coin 20 times consecutively. The winner of the game is the player who tosses the most consecutive tails. Titus decides to go first and tosses tails five times in a row. Their parents, Margaret and Remi, are observing the game and make the following observations before Titus attempts the sixth toss:Margaret: The probability of Titus tossing tails has to be greater than 75 percent because he is on a roll!Remi: No, Margaret, the probability of Titus tossing tails has to be less than 25 percent because he hasnt tossed heads in the last five tosses and he is due to toss heads!A behavioral economist would conclude that Margarets statement is an example of the ________ fallacy, and Remis statement is an example of the ________ fallacy.a. continuum; hot-hand b. hot-hand; broken-window c. gamblers; hot-handd. hot-hand; gamblerse. behavior; broken-window

Q: In the 1990s, researchers Clotfelter, Cook, and Terrel analyzed data from a particular game of chance that was offered in both the Maryland and New Jersey state lotteries. In the game, participants placed a bet and then guessed a three-digit number. After all bets had been placed, a three-digit number was randomly drawn by state lottery representatives. If a bettor correctly guessed the number drawn, the bettor won a large prize. The researchers found clear evidence that lottery players bet less on a number that had won in the recent past. This finding indicates that the ________ fallacy is not at work.a. hot-hand b. gamblers c. casinosd. genetice. naturalistic

Q: If 25 consecutive tosses of a fair coin have all been heads, some individuals tend to think that the next one must be heads. This is an example of the ________ fallacy.a. hot-hand b. continuum c. broken-windowd. definiste. gamblers

Q: If 12 consecutive tosses of a fair coin have all been tails, some individuals tend to think that the next one must be tails. This is an example of the ________ fallacy.a. casinos b. dealers c. gamblersd. masked-mane. hot-hand

Q: The opposite of the gamblers fallacy is thea. hot-hand fallacy. b. historians fallacy. c. fallacy of single cause.d. dealers fallacy.e. mind-projection fallacy.

Q: Suppose a student tosses a fair coin consecutively 10 times and gets tails each time. Which belief about the probability of getting heads on the next toss is NOT consistent with the gamblers fallacy?a. The probability of getting heads on the next toss is u2158.b. The probability of getting heads on the next toss is u215a.c. The probability of getting heads on the next toss is .d. The probability of getting heads on the next toss is .e. The probability of getting heads on the next toss is u00bd.

Q: Miranda tosses a fair coin consecutively five times and gets heads each time. When her son Shane asks her about the probability of getting tails on the next (sixth) toss, Miranda says the following: This is a fair coin, so I should toss heads approximately 50 percent of the time. Because I have tossed heads 100 percent of the time for my first five tosses, then the probability of me tossing tails on the sixth toss must be greater than 50 percent. Mirandas statement is an example of the ________ fallacy.a. hot-hand b. association c. gamblersd. dealerse. Showtime

Q: Consider the following scenario when answering the following questions:Imagine a game show on television where one lucky contestant is presented with four upside-down buckets that are numbered 1, 2, 3, and 4. Under one of the buckets is a $100 bill. Under each of the other three buckets is a $10 bill. After the game ends, the contestant will receive the amount of money that is under his or her bucket.The host of the game show asks the contestant to choose one of the four buckets. After the contestant makes a choice, the host lifts one of the remaining three buckets to reveal a $10 bill under it. At this point, three buckets remain uncovered: the bucket that the contestant originally chose and the two buckets that were not uncovered by the host.The host subsequently asks the contestant if he or she would like to keep the original bucket or change buckets to one of the two other buckets remaining.If 12 consecutive tosses of a fair coin have all been tails, some individuals tend to think that the next one must be heads. This is an example of the ________ fallacy.a. casinos b. dealers c. gamblersd. masked-mane. hot-hand

Q: Imagine a game show on television where one lucky contestant is presented with three upside-down buckets that are numbered 1, 2, and 3. Under one of the buckets is a five-ounce gold bar. Under each of the other two buckets is a one-ounce gold bar. After the game ends, the contestant will receive the gold bar that is under his or her bucket.The host of the game show asks the contestant to choose one of the three buckets. The contestant chooses bucket #1. After the contestant makes a choice, the host lifts up bucket #2 to reveal a one-ounce gold bar under it. At this point, only two buckets remain uncovered: the bucket that the contestant originally chose (bucket #1) and the bucket that was not uncovered by the host (bucket #3).The host subsequently asks the contestant if he or she would like to keep the original bucket or change buckets to the only other bucket remaining. The contestant changes buckets from the original bucket (bucket #1) to the other bucket remaining (bucket #3). When the contestant originally made the choice of bucket #1, the probability of the five-ounce gold bar being under that bucket was u2153 . This means that the probability of the five-ounce gold bar being under either bucket #1 or bucket #2 was u2154 . When the host lifted bucket #2 to reveal a one-ounce gold bar under it, the probability of the five-ounce gold bar being under bucket #3 is now ________, while the probability of the five-ounce gold bar being under bucket number #1 is still ________.a. u00bd ; u2153 b. u2154 ; u2153 c. u2153 ; u2153d. u2153 ; u2154e. u00bd ; u2154

Q: Suppose a casino is offering a game of chance where Ricardo can bet $6 on the flip of a fair coin. If the casino employee flips tails, Ricardo loses the $6 that he bet. If the casino employee flips heads, Ricardo receives a payout of $11 (the $6 he originally bet plus another $5). If Ricardo sits in the casino and plays this game 1,000 times consecutively over a period of 12 hours, he a. will likely end up with less money than he started with. b. will likely end up with more money than he started with. c. will likely end up with the same amount of money that he started with. d. is equally likely to end up with more money or less money than he started with. e. will definitely end up with less money than he started with.

Q: Suppose a casino is offering a game of chance where Teresa can bet $5 on the flip of a fair coin. If the casino employee flips tails, Teresa loses the $5 that she bet. If the casino employee flips heads, Teresa receives a payout of $11 (the $5 she originally bet plus another $6). If Teresa sits in the casino and plays this game 1,000 times consecutively over a period of 12 hours, she a. will likely end up with less money than she started with. b. will likely end up with more money than she started with. c. will likely end up with the same amount of money that she started with. d. is equally likely to end up with more money or less money than she started with. e. will definitely end up with less money than she started with.

Q: Which of the following is an example of a game of chance? a. Jeremiah plays basketball with his girlfriend. b. Joan works eight hours at Taco Bell. c. Jacqueline buys a lottery ticket. d. John runs in a marathon. e. Jalisha purchases salsa dancing shoes.

Q: Which of the following activities involves Mary playing a game of chance? a. Mary works eight hours at Dairy Queen and earns a total of $60. b. Mary spends $250 on a used video game console. c. Mary wins a $1,000 Visa gift card in a competitive food-eating competition. d. Mary wins a $500 prize in a business plan competition. e. Mary deposits $5 in a slot machine and does not win anything.

Q: Most state lotteries a. have positive expected values. b. have negative expected values. c. have expected values equal to zero. d. do not have expected values because state lotteries are not games of chance. e. do not have expected values because most state lotteries are operated by government agencies.

Q: For mathematical convenience, assuming that people are fully rational and self-interested a. clearly does not mean that people really are fully rational and self-interested all the time. b. clearly means that people really are fully rational and self-interested all the time. c. is a practice never followed by economists, but is often followed by psychologists. d. is a practice always followed by behavioral economists. e. is a practice that is banned in most states by professional ethics laws.

Q: In 2011, Edward Cartwright, a behavioral economist, gave credit to the Nobel Prizewinning economist Herbert Simon for launching what Cartwright calls the you cannot be serious attack on the standard economic model. Cartwright cites a paper published by Simon in 1955, where the author uses the standard economic model to solve elegantly how a rational person should behave. After solving an equation for this rational persons optimal behavior, Simon states: My first empirical proposition is that there is a complete lack of evidence that, in actual human choice situations of any complexity, these computations can be, or are in fact, performed.This statement by Simon can be best described as a call toa. governments for increased education spending so that more decision-makers can and will perform the computations that Simon is referring to.b. citizens to do their part to reduce the complexity of all human choice situations.c. economists to replace Homo economicus in economic thinking with something more humanlike.d. economists to continue to use Homo economicus to guide their understanding of the complex nature of human decision-making.e. the United States Department of Economic Rationality to impose a new bylaw prohibiting the use of the standard economic model in academic research papers.

Q: In 1990, Richard Thaler, a behavioral economist, said the following with respect to the standard economic model: The problem seems to be that while economists have gotten increasingly sophisticated and clever, consumers have remained decidedly human. Which of the following statements best describes what Thaler implies in this sentence? a. The standard economic model should be dumbed down so that more citizens can understand it. b. The standard economic model fails to account for the fact that human beings generally do not act like Homo economicus. c. Economists should educate citizens to become more sophisticated and clever so that their actions better fit the standard economic model. d. The behavioral economic model needs to be abandoned. e. Human nature is neither clever nor sophisticated.

Q: A consumer who adheres to bounded rationality is a. a fully rational consumer who behaves like an all-knowing supercomputer when making cost-benefit calculations. b. a completely irrational consumer who is unable to use logic to compare costs and benefits. c. neither capable of performing the problem-solving that traditional economic theory assumes nor is inclined to do so. d. rational only in situations that involve market prices. e. never rational in situations that involve market prices.

Q: In 2002, Daniel Kahneman was awarded the Nobel Prize in Economics for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.Based on this information, which academic field would Daniel Kahneman most likely identify with?a. economics b. industrial-organizational sociology c. evolutionary biologyd. Englishe. behavioral economics

Q: When comparing the standard models in the respective fields of economics and psychology, it is clear that a. both economists and psychologists always assume that people always behave in a fully rational way. b. both economists and psychologists always assume that people do not act in a fully rational way. c. neither economists nor psychologists always assume that people always behave in a fully rational way. d. economists generally assume that people always behave in a rational way, whereas psychologists generally do not. e. psychologists generally assume that people always behave in a rational way, whereas economists generally do not.

Q: Whenever consumers make decisions without perfect information, the decision reflectsa. perfect rationality. b. perfect irrationality. c. bounded rationality.d. unbounded rationality.e. confounded rationality.

Q: Behavioral economists draw on insights from ________ to explore how people behave in economic settings.a. experimental psychology b. experimental biology c. evolutionary biologyd. astrologye. theoretical physics

Q: A relatively new area in the field of economics called ________ economics studies people who appear to make choices that do not seem rational in an economic sense.a. business-cycle b. financial c. behaviorald. labore. entrepreneurial

Q: Behavioral economics studies a. economy-wide phenomena such as real output, inflation, unemployment, and business cycles. b. the decision-making processes of rational, self-interested economic actors. c. all aspects of the markets and institutions that make up the financial system. d. the implications of trade among individuals, firms, and countries. e. how experimental psychology provides insight into the decision-making process.

Q: Behavioral economics studies how ________ influences the decision-making process.a. the weather pattern b. rational economic action c. experimental psychologyd. the financial sectore. macroeconomics

Q: ________ is the field of economics that studies how experimental psychology influences the decision-making process.a. Public finance b. Psychology c. Behavioral economicsd. Sociologye. Macroeconomics

Q: Behavioral economics seeks to dethrone ________ and replace him with something more human.a. Homo rationalimus b. Homo economicus c. Homo macrusd. Homo sapiense. Homo stevejobsimus

Q: The traditional economic model conceptualizes the economy as made up of infinitely calculating, unemotional maximizers that have been calleda. Homo consumus. b. Homo economicus. c. Homo microcus.d. Homo demandcurvius.e. Homo elasticious.

Q: The standard economic model assumes people can be approximated by ________, who is assumed to be fully rational, calculating, and selfish; has unlimited computational ability; and never makes systematic mistakes.a. Homo consumus b. Homo microcus c. Homo demandcurviusd. Homo economicuse. Homo elasticious

Q: Most economic theory proceeds as though economic actors are all rational, self-interested decision-makers. Economists refer to this hypothetical rational, self-interested decision maker asa. Homo consumus. b. Homo microcus. c. Homo demandcurvius.d. Homo economicus.e. Homo elasticious.

Q: CHAPTER 17: Behavioral Economics and Risk TakingThe hypothetical species Homo economicus is acutely aware of opportunities in the environment anda. strives to maximize the benefits received from each course of action while minimizing the costs.b. strives to minimize the benefits received from each course of action while maximizing the costs.c. strives to equalize the benefits received and costs incurred from each course of action.d. takes an action only if the benefits to society of this action outweigh the costs to society of this action.e. never takes action because of the understanding that all individual actions are to the detriment of society.

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Q: We would describe a persons choices as time inconsistent when people a. cant make choices in the present that determine their choices in the future. b. cant predict how current choices will affect future choices. c. change their minds just because that was then, this is now. d. regret a decision they made, so they wont make the same decision again. e. try to figure out how they will decide in the future, and that decision influences todays decision.

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Q: Peoples choices for the present time frame are usually ________ with their choices for the future because the future choices are ________. a. inconsistent; a result of status quo bias b. consistent; a result of priming effects c. inconsistent; a result of framing effects d. inconsistent; more distant in time e. consistent; more likely to have more information

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Q: Ana keeps delaying to act on her resolution to work out at the recreation center. Her preference is a. a result of status quo bias. b. a result of priming effects. c. a result of framing effects. d. more consistent since the decision is made in the present rather than the future. e. time inconsistent.

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Q: An important source of human behavior bias in decision-making comes froma. resistance to change. b. price. c. temptation.d. limited reasoning.e. randomness.

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Q: People notice that when they shop online, they see a box checked that tells them to uncheck the box if they dont want to receive news of new products. This checked box is an example of aa. priming effect. b. framing effect. c. intertemporal decision bias.d. status quo bias.e. preference reversal.

Q: SHORT ANSWER1. What are the three ways that bounded rationality, or limited reasoning, can be explained?

Q: Victor complains that he never has enough time to do his homework. He brags that he has won 96 percent of 4,000 games of FreeCell this semester. Which of the following economic concepts of behavior is applicable?a. rational b. irrational c. bounded rationald. limited reasoninge. preference reversal

Q: Economists who study behavior mostly conclude that people ________ well-being, but sometimes ________.a. try to maximize their; make mistakesb. try to maximize their; maximize the effect of bad choicesc. try to achieve some; change their minds just because that was then, this is nowd. dont worry too much about their; get lucky with a good decisione. believe they maximize their; dont worry too much about it

Q: A choice that does not follow the assumption of rational behavior is a. telling people you want to lose weight, but ordering dessert after a meal. b. paying more to use a credit card than you would if you used cash. c. refusing to leave a movie that brings no pleasure. d. complaining about lack of time while you play solitaire. e. All of the above behaviors do not follow the assumption of rational behavior.

Q: Marcus gets a new cell phone for graduation. He abandons his old phone in a drawer forever, even though he could sell it on Craigslist for $50. Marcuss behavior is a. irrational, because he wouldnt pay $50 for his old phone today, and still gives it up. b. rational, because he wouldnt pay $50 for his old phone today, and still gives it up. c. irrational, because the value of his new phone is $300 and should be compared to the $50 value of the old phone. d. rational, because the value of his new phone is $300 and should be compared to the $50 value of the old phone. e. neither rational nor irrational, since Marcus didnt buy the new phone.

Q: Maria gets two tickets to the opera as a tip bonus from a restaurant customer. She has never been to an opera, nor would she ever pay the $130 price for these tickets. She goes to this opera rather than getting $130 online for selling the tickets. Marias behavior is a. irrational, since Maria would not buy such tickets but gives up $130 by not selling the tickets. b. rational, since Maria believes she should see the opera. c. irrational, since Maria cant put a value on the tickets. d. rational, since Maria can now see an opera without paying. e. neither rational nor irrational, since Maria didnt buy anything.

Q: In human behavioral economics, a choice to do an activity means a. choosing not to do the next best activity. b. choosing not to do a more desirable activity. c. evaluating that activity versus an alternative group of activities. d. that activity should be put at the top of a to-do list. e. that activity must have an observable characteristic to be valid in a behavioral sense.

Q: In July 2012, it cost $125 to purchase a ticket to visit the parks at Disneyland for one day. A five-day pass to the same parks cost only $290. Disneyland charges less for the additional days because ofa. the real-income effect. b. diminishing marginal utility. c. marginal utility.d. the substitution effect.e. the consumer optimum.

Q: Individuals who havent studied economics may not understand how all-you-can-eat buffets manage to make money. This can be explained by the concept of ________, which makes each trip to the buffet line less satisfactory than the previous one.a. real-income effect b. marginal utility c. diminishing marginal utilityd. the substitution effecte. the consumer optimum

Q: Refer to the following figure to answer the following questions: When marginal utility declines as consumption increases, the consumer is experiencinga. diminishing marginal utility.b. the real-income effect. c. marginal utility.d. the substitution effect.e. the consumer optimum.

Q: Refer to the following figure to answer the following questions: Diminishing marginal utilitya. occurs when the additional utility for each good declines as consumption increases.b. is the additional satisfaction derived from consuming one more unit of a good or service.c. is the combination of goods and services that maximizes utility for a given income.d. occurs when a consumer buys more of a good as a result of a relative price change.e. occurs when there is a change in purchasing power as a result of a change in the price of a good.

Q: Refer to the following figure to answer the following questions: When given the marginal utility of the first five units of a product, we can calculate the total utility bya. finding the difference between the fourth and fifth units.b. finding the difference between the first and fifth units.c. looking at the marginal utility of the fifth unit.d. adding the fourth and fifth units.e. adding the marginal utilities of the first five units.

Q: Refer to the following figure to answer the following questions: This consumer experiences diminishing marginal utilitya. across all levels of consumption.b. until he consumes his fifth cupcake.c. until he consumes his seventh cupcake.d. from his seventh cupcake on.e. for his fifth and sixth cupcakes only.

Q: Refer to the following figure to answer the following questions: Total utility is highest at the ________ cupcake.a. first b. eighth c. ninthd. seventhe. sixth

Q: Refer to the following figure to answer the following questions: Marginal utility is negativea. at all levels of consumption.b. from the consumers eighth cupcake on.c. never.d. for the consumers fifth and sixth cupcakes only.e. when marginal utility is positive.

Q: Refer to the following table to answer the following questions:SodasConsumedTotal Utility(Utils per Soda)00135260380490590675750820This consumer experiences diminishing marginal utilitya. over all levels of consumption.b. up until she consumes her fifth soda.c. up until she consumes her sixth soda.d. from her sixth soda on.e. for her fifth and sixth sodas only.

Q: Marginal utility is negative a. at all levels of consumption. b. from the sixth soda on. c. never. d. for the fifth and sixth sodas only. e. when marginal utility is positive.

Q: This consumer experiences diminishing marginal utility a. over all levels of consumption. b. up until she consumes her fifth taco. c. up until she consumes her sixth taco. d. from her sixth taco on. e. for her fifth and sixth tacos only.

Q: Marginal utility is negative a. at all levels of consumption. b. from this consumers sixth taco on. c. never. d. for this consumers fifth and sixth tacos only. e. when marginal utility is positive.