Cognitive Biases and Behavioral Economics Quiz

Cognitive bias is...

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

• The desire to seek out information that confirms our existing beliefs

• The belief that our abilities are better than they actually are

• The concept of placing more value on an item when we own it

Behavioral economics attempts to explain:

• the behavior of demand curves.

• how human psychology influences economic behavior.

• why sunk costs should be ignored in decision making.

• why economists behave differently from everyone else.

When people place more value on things they own because they own them, they may be demonstrating:

• Ownership Bias

• Endowment Effect

• Herd Mentality

• Confirmation Bias

Tendency to feel anxiety / fear that an exciting or interesting event may currently be happening elsewhere is:

• FOMO (Fear of missing out)

• Hedonic adaptation

• Endowment effect

• Behavioral finance

Tendency to conform to the behaviors and beliefs of the people around you

• Bandwagon Effect

• Sunk cost fallacy

• Sunk costs

• Loss aversion

Selecting a cleaner with the lable "Kills 99% of germs" over one that says "Only 1% of germs survive" may be a result of which bias?

• Sunk Cost

• Endowment Effect

• Framing Effect

• Confirmation Bias

How does behavioral economics differ from traditional economics?

• It ignores human psychology

• It focuses on psychological influences on economic decisions

• It only studies supply and demand

• It assumes all decisions are rational

What is the main reason people fall for the sunk cost fallacy?

• They want to avoid losses already incurred

• They want to follow the crowd

• They want to confirm their beliefs

• They want to own more things

Which of the following best illustrates bandwagon effect?

• Buying a product because it is popular, not because you need it

• Refusing to change your mind despite new evidence

• Overvaluing your own possessions

• Fearing you are missing out on an event

What is a common effect of the endowment effect in personal finance?

• Refusing to sell assets at a fair price

• Only seeking information that supports your investments

• Following the crowd in investment decisions

• Feeling anxious about missing out on deals