Unit 1 - Behavioral Economics and Cognitive Biases Test

What is Behavioral Economics?

• The subfield of economics that applies psychological insights into human behavior and to explain economic decision making.

• A branch of biology that studies animal behavior in the wild.

• A field of engineering focused on optimizing human-machine interaction.

• A type of literature that explores economic themes through fictional stories.

What is Cognitive Bias?

• A subconscious error in thinking that leads to irrational decision making.

• A conscious effort to improve memory retention.

• A method of logical reasoning used in mathematics.

• A technique for enhancing creativity in art.

What is Confirmation Bias?

• The tendency to search for information that supports our preconceptions and to ignore or distort contradictory evidence.

• The tendency to remember only negative experiences.

• The tendency to overestimate the accuracy of our beliefs and judgments.

• The tendency to attribute others' actions to their character rather than to situational factors.

What is the Endowment Effect?

• The tendency to put more value on things you already own.

• The tendency to underestimate the value of your possessions.

• The tendency to prefer new items over old ones.

• The tendency to ignore the value of owned items.

What is FOMO (Fear of Missing Out)?

• The tendency to feel anxiety/fear that an exciting or interesting event may currently be happening elsewhere, often aroused by posts seen on a social media website.

• A type of investment strategy focused on long-term gains.

• A psychological disorder related to memory loss.

• A new form of online payment system.

What is Hedonic Adaptation?

• The tendency to return to a baseline level of happiness regardless of whether you go through a positive or negative experience or event.

• A psychological disorder characterized by extreme mood swings.

• The process of adapting to new physical environments.

• A method of increasing intelligence through meditation.

What is Herd Mentality?

• The tendency to conform to the behaviors and beliefs of the people around you.

• A psychological disorder involving memory loss.

• The ability to make decisions independently of others.

• A leadership style focused on individualism.

What is Loss Aversion?

• The tendency to regard losses as considerably more important than gains of comparable magnitude.

• The tendency to always prefer risky options over safe ones.

• The belief that past losses will be compensated by future gains.

• The tendency to ignore losses and focus only on gains.

What is Overconfidence Bias?

• The tendency people have to be more confident in their own abilities.

• The tendency to underestimate one's own abilities.

• The tendency to always rely on others' opinions.

• The tendency to avoid making decisions due to fear of failure.

What is Overestimation?

• When a person believes they are better at something than they actually are.

• When a person underestimates their abilities.

• When a person ignores their strengths.

• When a person is unaware of their weaknesses.