4th Period Behavioral Economics Unit Test

Name

Which of the following BEST demonstrates herd mentality?

• Sophie sees an ad for a pair of shoes on Instagram and decides to buy them
• Will really likes an android phone his dad has but chooses to buy an iPhone because his friends all have one
• Charlie decides to buy a jacket they saw a friend wearing that they really liked
• Juan is in a department store, sees a shirt he likes, and decides to buy it

Due to FOMO, many people are…

• Spending money they don’t have and going into debt
• Making purchases that align with their values
• Quitting social media for good, costing companies billions of dollars
• Saving unprecedented amounts of money for their futures

One realistic way to combat the influence of herd mentality and FOMO is…

• Immediately delete your social media profiles
• Close all of your credit card accounts
• Follow a budget and align your spending with your financial goals and priorities
• Put away half of your paycheck in a savings account

Jaq purchases a new Nike jacket. What would you expect to happen over time due to hedonic adaptation?

• Jaq's happiness will increase and she’ll remain at her new, higher level of happiness
• Jaq's happiness will remain at its baseline level over time
• Jaq's happiness will decrease and she’ll remain at her new, lower level of happiness
• Jaq's happiness will initially increase and then decrease to her baseline level of happiness over time

Confirmation bias is…

• Valuing your own opinions over the opinions of others
• The tendency to interpret new evidence as proof of one's existing beliefs or theories
• Believing that you are better at something then you actually are
• An exaggerated certainty that a person is correct

All of the following are types of confirmation bias EXCEPT…

• Interpreting information to support your existing belief
• Purposely ignoring information that challenges your belief
• Only remembering details that uphold your belief
• Seeking out objective facts that go against your belief

Roger finds a stock that he is interested in buying. Which of the following behaviors demonstrates his overconfidence bias?

• Roger seeks out sources that contradict his decision to buy the stock
• Roger decides not to purchase the stock because it is not worth the risk
• Roger invests the majority of his available money into buying shares of this stock
• Roger waits 2 to 3 days before buying the stock

All of the following are common explanations for why we are driven to buy more stuff EXCEPT…

• We like new things
• We want to help others
• We want to feel special
• We like to feel good

Isaiah learned about hedonic adaptation and wants to spend his money more wisely. Which of the following actions is the BEST way to do so?

• Buying a case for his phone a month after getting a new one
• Donating money to a local charity that supports a cause he cares about
• Purchasing a shirt impulsively after seeing an ad on social media
• Getting the latest model of his laptop even though his old one works fine