Behavioral Economics

Which of the following best describes the concept of 'bounded rationality' in behavioral economics?

• Humans always make rational decisions with complete information.

• Humans make decisions based on limited information and cognitive limitations.

• Humans are completely irrational in their decision-making processes.

• Humans rely solely on emotions when making decisions.

In behavioral economics, what does the 'endowment effect' refer to?

• The tendency to overvalue things we own compared to things we do not own.

• The tendency to undervalue things we own compared to things we do not own.

• The tendency to value all items equally, regardless of ownership.

• The tendency to disregard ownership when valuing items.

Which experiment is most closely associated with the concept of 'loss aversion' in behavioral economics?

• The Ultimatum Game

• The Marshmallow Test

• The Prisoner's Dilemma

• The Iowa Gambling Task

What is the 'nudge theory' in behavioral economics?

• A theory that suggests small interventions can significantly alter behavior.

• A theory that suggests large interventions are needed to change behavior.

• A theory that suggests behavior cannot be changed through interventions.

• A theory that suggests behavior is only influenced by financial incentives.

In the context of behavioral economics, what does 'anchoring' refer to?

• The tendency to rely heavily on the first piece of information encountered.

• The tendency to ignore the first piece of information encountered.

• The tendency to rely on multiple sources of information equally.

• The tendency to disregard all information when making decisions.

Which of the following is an example of 'hyperbolic discounting' in behavioral economics?

• Preferring $100 today over $110 tomorrow.

• Preferring $110 tomorrow over $100 today.

• Valuing $100 today the same as $110 tomorrow.

• Ignoring both $100 today and $110 tomorrow.

What does the 'status quo bias' imply in behavioral economics?

• A preference for the current state of affairs and resistance to change.

• A preference for changing the current state of affairs frequently.

• A preference for neither changing nor maintaining the current state.

• A preference for changing the current state regardless of consequences.

In behavioral economics, what is 'prospect theory' primarily concerned with?

• How people make decisions under risk and uncertainty.

• How people make decisions with complete certainty.

• How people make decisions without any risk.

• How people make decisions based solely on emotions.

Which of the following best describes 'mental accounting' in behavioral economics?

• The tendency to categorize and treat money differently depending on its source or intended use.

• The tendency to treat all money the same, regardless of its source or intended use.

• The tendency to ignore the source of money when making financial decisions.

• The tendency to rely solely on external advice for financial decisions.

What is the 'decoy effect' in behavioral economics?

• The phenomenon where the presence of a third option influences preferences between two other options.

• The phenomenon where the presence of a third option has no influence on preferences.

• The phenomenon where only two options are considered, regardless of a third option.

• The phenomenon where preferences are unaffected by any options.