1.3 Types of Market Failure Economics

What is the definition of Psychological bias in behavioral economics?

• Any systematic deviation from a rational choice

• A method to maximize profits in markets

• A legal rule for economic transactions

• A type of financial investment

What is Scarcity bias?

What does Social image refer to in behavioral economics?

• Humans present themselves to look good to others to produce positive rewards

• The way people perceive their own abilities regardless of others

• A person's private thoughts about their own actions

• The economic value assigned to social media profiles

What is the meaning of Social norms in behavioral economics?

• Day-to-day behaviour influenced by prevailing customs

• Government regulations on economic activities

• Personal financial goals and ambitions

• Market-driven price mechanisms

What is Social proof?

• When an individual looks to the behaviour of their peers to inform their decision-making

• A legal document proving ownership of property

• A scientific method for testing hypotheses

• A type of financial investment strategy

What is Status quo bias?

What is the Sunk cost effect?

What is System 1 Thinking?

What is System 2 thinking?

• Slower, careful, effortful decision-making

• Automatic, fast, and unconscious thinking

• Emotional, impulsive reactions

• Random, unstructured thought processes

Which of the following is NOT a type of market failure?

• Externalities

• Under-provision of public goods

• Information gaps

• Perfect competition