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WorksheetsUnit 1 Behavioral Economics Review
Total questions: 20
Worksheet time: 10mins
Which of the following best describes what a cognitive bias is?
A rational decision that is based on research and facts
The belief that we are right until someone provides information that contradicts our belief
An error in the way we think that can influence our decisions
The belief that a person should change their opinions when new facts arise
Unlike traditional economics, behavioral economics believes that…
People do not always behave in a rational way when making economic decisions
People will always update their viewpoints based on new information
There is no way to predict how people will make economic decisions
People behave in a rational way when making economic decisions
People who experience FOMO may...
Save a percentage of their paycheck each month
Go into debt to keep up with everyone else
Donate money to a cause they care about
Create and stick to a monthly budget
When using social media, it's important to remember that...
Marketers have your best interests in mind and want you to be financially responsible
The more likes a post has, the more trustworthy and accurate the information is likely to be
People typically only post about the best parts of their lives on social media
Social media ads are trying to get you to buy stuff you NEED, not want
The pain of losing a $20 bill is felt more than the joy of finding it.
This is a result of...
Loss aversion
Overconfidence
Sunk cost
Endowment effect
Overconfidence bias may lead the majority of Americans to think that they are…
Below average drivers
Extremely poor drivers
Average drivers
Above average drivers
All of the following explain why humans might "follow the herd" EXCEPT...
People prefer having opinions that are very different from those of others
It can be uncomfortable standing out from the crowd
Humans evolved to stick with the herd to survive
Fighting social pressure can be difficult to do
Your friend gives you an item. A day later, they offer to trade you another item of similar value. According to the endowment effect, most people would keep the item…
They were offered second
They could sell for the most
They received first
They think looks the best
Herd mentality may explain why...
Ben bought a shirt he liked from an unpopular brand
Davona chose to skip dinner with her friends and watched a movie at home instead
Ginnifer decided to keep her current phone even though her closest friends bought the new version
Mason went to see a movie with his friends even though he didn't like the genre
Investments of time, effort, and money that cannot be recovered are...
Opportunity costs
Avoidable costs
Sunk costs
Relevant costs
Which of the following is the LEAST likely to influence a person’s financial decisions?
What their friends want
What their budget is
What their family’s needs are
What their values are
Putting more value on an object you own for more than its actually worth is an example of...
Overconfidence
Endowment effect
Confirmation bias
The Fear of Missing Out (FOMO)
Which of the following scenarios BEST demonstrates FOMO (Fear of Missing Out)?
Megan takes a baking class after seeing a sign for the class at her favorite bakery
José wants to go see a movie that all of his friends have seen and are raving about
David goes on a vacation to Europe and posts about it on social media every day
Angela sees an advertisement for a pair of shoes and decides to buy them
A website tells you, "Only one left!" while shopping online. Which loss aversion strategy is this website using?
Coupons
Buy now, get free shipping
Free trials and samples
Scarcity and urgency
Sebastian began day trading stocks at the beginning of the summer. After a month, he made a profit of $200. Due to his short term success and his belief that he is a highly skilled trader, Sebastian puts his entire savings into the market. This is an example of…
Overconfidence Bias
The Fear of Missing Out (FOMO)
Confirmation Bias
The Endowment Effect
After learning about hedonic adaptation, Tamara wants to spend her money more wisely. Which of the following might help her do so?
Getting a new phone accessory for her phone case
Buying a new laptop even though her current one still works well
Donating money to a charity that supports a cause she cares about
Purchasing a dress after seeing an ad on social media
You spend an entire Saturday going to car dealerships in search of a used car. You spend hours looking at cars and even test drive a few, but there are none you like that fit your budget. What is the sunk cost you should ignore when deciding whether or not to buy a car that day?
The time it will take to drive home
The cost of the warranty
The time you spent looking for cars that day
The cost of the car
All of the following are types of values that can impact your financial decisions EXCEPT…
Social values
Inner values
Physical values
Spiritual values
You are doing research on a new electric car that you are interested in buying. You only visit the car company’s website and an online message board of electric car enthusiasts to do your research. This strategy may lead to …
Confirmation bias
Herd mentality
The endowment effect
Loss aversion
Due to hedonic adaptation, what do you expect would happen to Anu's level of happiness after buying a new jacket?
It would initially decrease, then return to a baseline level
It would remain at a baseline level, then increase over time
It would remain at a baseline level, then decrease over time
It would initially increase, then return to a baseline level
