Question 1

_____ is the study of how economic decisions are impacted by psychological factors beyond rational economic self-interest.&#10;A) Microeconomics&#10;B) Macroeconomics&#10;C) Behavioral economics&#10;D) Managerial economics

Accepted Answer

Behavioral economics combines insights from psychology with economic theory to explain why people sometimes make irrational decisions and how their behavior does not always follow the predictions of economic models based on rational choice.

Question 2

_____ is built on the principle that decisions are reached on the basis of rational economic self-interest.&#10;A) Economics&#10;B) Finance&#10;C) Psychology&#10;D) Marketing

Accepted Answer

Economics is the discipline that is fundamentally built on the principle that individuals and entities make decisions based on rational economic self-interest, aiming to maximize utility or profit.

Question 3

_____ involves examining a complex mixture of economic and psychological factors to explain human behavior.&#10;A) Economics&#10;B) Finance&#10;C) Psychology&#10;D) Marketing

Accepted Answer

C

Question 4

Behavior economics assumes that:&#10;A) organizations always act based on rational decision making.&#10;B) complex mathematical calculations are needed.&#10;C) people do not always make rational decisions.&#10;D) macroeconomics is more important than microeconomics.

Accepted Answer

Behavioral economics posits that individuals often make decisions based on irrational factors, contrary to the traditional economic theory that assumes rational decision-making.

Question 5

_____ occurs when neither player can improve his or her outcome through a unilateral change in strategy.&#10;A) A simulation solution&#10;B) A Nash equilibrium&#10;C) A qualitative framework&#10;D) An assumption model

Accepted Answer

A Nash equilibrium occurs when no player can benefit by changing strategies while the other players keep their strategies unchanged. This concept is fundamental in game theory, indicating a state where every participant's strategy is optimal given the strategies of the others.

Question 6

The _____ game illustrates that people behave economically irrationally in rejecting monetary splits where the second player can decline the split.&#10;A) simulation&#10;B) dictatorship&#10;C) ultimatum&#10;D) assumption

Accepted Answer

The ultimatum game demonstrates economic irrationality by showing that people will reject monetary splits if they perceive them as unfair, even if it means they receive nothing.

Question 7

In the _____ game, a variation of the ultimatum game, the decision of the first player is binding.&#10;A) simulation&#10;B) dictatorship&#10;C) equilibrium&#10;D) assumption

Accepted Answer

In the dictatorship game, unlike the ultimatum game where the second player can accept or reject the offer, the decision of the first player (the "dictator") is binding, meaning the second player has no choice but to accept the decision.

Question 8

In the ultimatum game, the second player should _____ to maximize his or her payoff according to the traditional economic rational self-interest concept.&#10;A) reject any monetary split&#10;B) reject any monetary split less than 50/50&#10;C) accept any monetary split greater than 50/50&#10;D) accept any monetary split

Accepted Answer

According to the traditional economic rational self-interest concept, the second player should accept any monetary split to maximize his or her payoff, as receiving any amount is better than receiving nothing.

Question 9

Real-world outcomes of the ultimatum game indicate that the first player often offers _____ split and the second player _____ any monetary splits less than 50%.&#10;A) a fair; accepts&#10;B) an unfair; rejects&#10;C) a fair; rejects&#10;D) an unfair; accepts

Accepted Answer

Real-world outcomes of the ultimatum game often show that the first player tends to offer a fair split, understanding that offers perceived as unfair are likely to be rejected by the second player. The second player, on the other hand, often rejects any monetary splits that are less than 50%, viewing them as unfair.

Question 10

Real-world outcomes of the ultimatum game indicate that people often care about:&#10;A) maximizing payoffs.&#10;B) fairness.&#10;C) self-interest.&#10;D) themselves only.

Accepted Answer

Real-world outcomes of the ultimatum game show that people often reject unfair offers, indicating that they care about fairness, even at a cost to themselves.

Question 11

Optimal economic decisions often require thinking about the _____ rather than focusing on the:&#10;A) long term; short term.&#10;B) short term; long term.&#10;C) present; future.&#10;D) past; present.

Accepted Answer

The answer of Optimal economic decisions often require thinking about...

Question 12

In response to _____, the government has policies designed to encourage certain behaviors, such as offering tax breaks to those who save for retirement.&#10;A) short-term rationalities&#10;B) short-term behavior temptations&#10;C) long-term rationalities&#10;D) long-term behavior temptations

Accepted Answer

The answer of In response to _____, the government has...

Question 13

_____ is the idea that the way in which a decision is presented to customers often affects their behavior.&#10;A) The halo effect&#10;B) Behavior temptation&#10;C) Framing&#10;D) The anchoring effect

Accepted Answer

The answer of _____ is the idea that the way...

Question 14

_____ is the concept of framing economic decisions on the basis of irrelevant information.&#10;A) The halo effect&#10;B) Behavior temptation&#10;C) Odd pricing&#10;D) The anchoring effect

Accepted Answer

The answer of _____ is the concept of framing economic...

Question 15

A bakery offers cupcakes for $4.99, brownies for $3.99, and cookies for $2.99. The bakery is relying on the framing practice of:&#10;A) confirmation bias.&#10;B) the halo effect.&#10;C) odd pricing.&#10;D) the anchoring effect.

Accepted Answer

The answer of A bakery offers cupcakes for $4.99, brownies...

Question 16

Juanita is considering purchasing a dress she just tried on but does not want to pay more than $75. The price tag says that the dress was originally priced at $150 but is now on sale for $100. Juanita buys the dress thinking that she got a great deal even though the price was more than she originally wanted to pay. This is an example of:

A) left digit bias.
B) the halo effect.
C) odd pricing.
D) anchoring.

Accepted Answer

The answer of Juanita is considering purchasing a dress she...

Question 17

An example of _____ occurs when a business introduces an upscale model of an existing product and experiences an increase in sales of the regular product to customers who believe it to be a bargain.&#10;A) left digit bias&#10;B) the halo effect&#10;C) odd pricing&#10;D) anchoring

Accepted Answer

The answer of An example of _____ occurs when a...

Question 18

_____ is a strategy whereby businesses reduce the price of a popular item to attract customers who will likely purchase other goods.&#10;A) Confirmation bias&#10;B) Leader pricing&#10;C) Odd pricing&#10;D) Anchoring

Accepted Answer

The answer of _____ is a strategy whereby businesses reduce...

Question 19

_____ is a consumer preference to maintain the current situation.&#10;A) Confirmation bias&#10;B) Leader pricing&#10;C) Status quo bias&#10;D) Anchoring

Accepted Answer

The answer of _____ is a consumer preference to maintain...

Question 20

_____ occurs when consumers are offered too many choices, leading them to be less likely to change their minds or make any purchase at all.&#10;A) Confirmation bias&#10;B) The paradox of choice&#10;C) The halo effect&#10;D) Anchoring

Accepted Answer

The answer of _____ occurs when consumers are offered too...

Question 21

When Jamal offers only three main entrees for his new restaurant rather than the 10 that his competition offers, he is hoping to avoid the _____ that is faced by many consumers.&#10;A) confirmation bias&#10;B) paradox of choice&#10;C) status quo bias&#10;D) anchoring

Accepted Answer

The answer of When Jamal offers only three main entrees...

Question 22

Miriam enrolled in a gym membership last year. In recent months, she has not used the gym much, yet she continues to pay her monthly membership fee. This is an example of:&#10;A) confirmation bias.&#10;B) paradox of choice.&#10;C) status quo bias.&#10;D) anchoring.

Accepted Answer

The answer of Miriam enrolled in a gym membership last...

Question 23

In game theory, the _____ is often at an advantage in sequential moves.&#10;A) largest firm&#10;B) first person to decide&#10;C) price leader&#10;D) incumbent

Accepted Answer

The answer of In game theory, the _____ is often...

Question 24

The _____ advantage occurs when the initial person to act has a strategic advantage in a game.&#10;A) leader&#10;B) decisions&#10;C) first-mover&#10;D) incumbent

Accepted Answer

The answer of The _____ advantage occurs when the initial...

Question 25

If a firm attempts to dominate a market, a second firm must then decide how to respond, given that the initial firm has already produced a large quantity. This is an example of a _____ advantage on the part of the initial firm.

A) leader
B) decisions
C) first-mover
D) incumbent

Accepted Answer

The answer of If a firm attempts to dominate a...

Question 26

First-mover advantage applies only in _____ games.&#10;A) simultaneous&#10;B) sequential&#10;C) zero sum&#10;D) Nash equilibrium

Accepted Answer

The answer of First-mover advantage applies only in _____ games.&#10;A)...

Question 27

(Figure: Sequential Move Game 0) In the figure, _____ has a first-mover advantage, and her highest payoff is _____.&#10;  &#10;A) Becky; $7.60&#10;B) Becky; $8.70&#10;C) Becky; $10.15&#10;D) Renee; $1.35

Accepted Answer