PFMM - Final Review

Which of the following best describes what a cognitive bias is?

• A rational decision that is based on research and facts

• The belief that we are right until someone provides information that contradicts our belief

• An error in the way we think that can influence our decisions

• The belief that a person should change their opinions when new facts arise

Unlike traditional economics, behavioral economics believes that…

• People do not always behave in a rational way when making economic decisions

• People will always update their viewpoints based on new information

• There is no way to predict how people will make economic decisions

• People behave in a rational way when making economic decisions

People who experience FOMO may...

• Save a percentage of their paycheck each month

• Go into debt to keep up with everyone else

• Donate money to a cause they care about

• Create and stick to a monthly budget

When using social media, it's important to remember that...

• Marketers have your best interests in mind and want you to be financially responsible

• The more likes a post has, the more trustworthy and accurate the information is likely to be

• People typically only post about the best parts of their lives on social media

• Social media ads are trying to get you to buy stuff you NEED, not want

The pain of losing a $20 bill is felt more than the joy of finding it.

This is a result of...

• Loss aversion

• Overconfidence

• Sunk cost

• Endowment effect

Overconfidence bias may lead the majority of Americans to think that they are…

• Below average drivers

• Extremely poor drivers 

• Average drivers 

• Above average drivers

Investments of time, effort, and money that cannot be recovered are... 

• Opportunity costs

• Avoidable costs

• Sunk costs

• Relevant costs

Putting more value on an object you own for more than its actually worth is an example of...

• Overconfidence

• Endowment effect

• Confirmation bias

• The Fear of Missing Out (FOMO)

A website tells you, "Only one left!" while shopping online. Which loss aversion strategy is this website using?

• Coupons

• Buy now, get free shipping

• Free trials and samples

• Scarcity and urgency

You are doing research on a new electric car that you are interested in buying.  You only visit the car company’s website and an online message board of electric car enthusiasts to do your research.  This strategy may lead to …

• Confirmation bias

• Herd mentality

• The endowment effect

• Loss aversion