Behavioral Economics Quiz

What did Richard Thaler win the Nobel Prize for?

• Introducing the concept of mental accounting

• Discovering the endowment effect

• Proving that humans make financial mistakes

• Developing the theory of transaction utility

What is the endowment effect?

• Separating money into imaginary categories

• Feeling the need to get 'your money's worth'

• Refusing to sell something for more than its worth

• Assigning more value to things we already own

What is the sunk cost fallacy?

• Assigning more value to things we already own

• Continuing with a decision because of past investments

• Refusing to sell something for more than its worth

• Feeling the need to get 'your money's worth'

What is transaction utility?

• Refusing to sell something for more than its worth

• The mental pleasure or pain from feeling like you paid less or more than something's worth

• Feeling the need to get 'your money's worth'

• Assigning more value to things we already own

What is mental accounting?

• Refusing to sell something for more than its worth

• Separating money into imaginary categories

• Assigning more value to things we already own

• Feeling the need to get 'your money's worth'

What is the main idea behind behavioral economics?

• Humans are emotional and impulsive

• Humans are perfectly rational beings

• Humans always make the best financial decisions

• Humans make predictable financial mistakes

What is the conventional wisdom that most economists believed in?

• Humans are perfectly rational beings

• Humans are emotional and impulsive

• Humans make predictable financial mistakes

• Humans always make the best financial decisions

What is the name of Richard Thaler's research?

• The Endowment Effect

• Predictable Money Mistakes

• Behavioral Economics

• Dumb Stuff People Do

What is the purpose of mental shortcuts and emotional instincts?

• To avoid predictable money mistakes

• To make perfect financial decisions

• To help us get by with imperfect brains

• To maximize happiness

What is the lesson from behavioral economics?

• To be pennywise

• To always make rational financial decisions

• To avoid all emotional instincts

• To be as wise as Penny