Question 1

Margaret knows that she needs to save 20% of her annual income for retirement.However,she spends 90% of her income each year.This is an indication that Margaret's preferences are

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The answer of Margaret knows that she needs to save...

Question 2

The results of the ultimatum game illustrate the fact that

Accepted Answer

The ultimatum game shows that people's behavior is not purely based on self-interest or rational economic calculations, but is influenced by social norms and a sense of fairness. Therefore, option A is the best choice. Option B is incorrect because homo economicus assumes that people only act in their own self-interest, which is not what is observed in the ultimatum game. Option C is also incorrect because the game shows that the most efficient outcome is not always the outcome that is chosen by the players.

Question 3

Evidence from experiments in which real people play the ultimatum game supports the idea that people

Accepted Answer

The ultimatum game experiments suggest that people are motivated by both fairness and self-interest. The game involves two players, where one player proposes how to divide a sum of money between them and the other player can either accept or reject the proposal. If the proposal is accepted, both players get the money as proposed. If it's rejected, both players get nothing. The experiments showed that proposers tended to offer a fairly equal split, while responders were more likely to reject unfair offers, even though it meant getting nothing. This suggests that while people are concerned about their own self-interest, they also care about fairness and are willing to punish those who act unfairly.

Question 4

Students of microeconomic principles often say they are going to study "tonight," because the only way to pass the exam is to study some every night.When "tonight" comes,some students choose to do something else.Come exam day,these students do not do well on their exam.This observation is an example of how people

Accepted Answer

This observation suggests that some people are inconsistent over time in their behavior, as they intend to study but end up doing something else.

Question 5

Suppose that an economics professor selects two students,Byron and Regina,to participate in a classroom experiment.The professor gives Byron ten $1 bills.Byron must pick an allocation of the ten $1 bills to offer to Regina.If Regina accepts the allocation,each student keeps his or her portion of the money.If Regina rejects the allocation,the professor keeps the $10,and each student receives nothing.Byron selects $9 for himself and $1 for Regina.Based on the studies of human decision making,which of the following statements is correct?

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The answer of Suppose that an economics professor selects two...

Question 6

Eli and Peyton are playing the ultimatum game,starting with $100.The coin flip results in Eli being the one to propose a division of the $100.If Eli acts as economic theory assumes,he should propose that

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The answer of Eli and Peyton are playing the ultimatum...

Question 7

Suppose a group of people read an article on capital punishment.Prior to reading the article,60% of the members of the group were opposed to capital punishment,while 40% of the members of the group were in favor of capital punishment.According to studies of human decision-making,which of the following is likely?

Accepted Answer

It is unlikely that all members of the group will change their opinion to either being completely opposed or in favor of capital punishment due to cognitive biases and pre-existing beliefs. Therefore, it is reasonable to assume that some members may change their opinion while others may not. Additionally, the initial proportions of the group's stance on capital punishment may still be reflected after reading the article. Hence, option C is the most likely outcome. Option D is not related to the given information and is therefore incorrect.

Question 8

If you are assigned the role of Player A in the Ultimatum game and you propose that player B gets $1 and you get $99

Accepted Answer

In the Ultimatum game, Player A proposes a split of a sum of money between themselves and Player B. If Player B accepts the offer, the money is split as proposed. If Player B rejects the offer, neither player receives any money.

In this case, Player A is proposing a split of $99 for themselves and only $1 for Player B. While this may be a rational wealth-maximizing choice for Player A, it is likely that Player B will reject the offer. This is because the proposed split is highly unequal and unfair. From Player B's perspective, it may be better to reject the offer and receive nothing rather than to accept an unfair split of the money. Therefore, the best choice is B.

Question 9

A mother gives her teenage daughter two choices: spend 20 minutes cleaning her room today or spend 25 minutes cleaning her room tomorrow.The same mother gives her same daughter two additional choices: clean out the garage for 20 minutes next Tuesday or 25 minutes next Wednesday.According to economic theory,

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The answer of A mother gives her teenage daughter two...

Question 10

The ultimatum game reveals that

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The answer of The ultimatum game reveals that
...

Question 11

Domingo is a contestant on a trivia quiz show.For every state capital he can correctly identify,he will win $1,000.However,before identifying any capitals,he must decide how many he thinks he can correctly identify.If he cannot identify as many as he has wagered,Domingo will not win any money.Suppose Domingo says that he can correctly identify 42 state capitals for a potential payoff of $42,000.According to studies of human decision-making,what is most likely to happen?

Accepted Answer

This scenario is an example of overconfidence bias, where people tend to overestimate their abilities and the likelihood of positive outcomes. In reality, it is unlikely that Domingo will be able to correctly identify all 42 state capitals. Therefore, the most likely outcome is that Domingo will identify fewer than 42 state capitals and will not win any money.

Question 12

In a dictator game,player A must divide $100 between player A and player B.In this game,player B does not have the opportunity to reject an offer - he or she goes home with whatever player A offers.Experiments have observed that when player A splits the $100,he or she consistently offers over $10 to player B.Which of the following comments fits best.

Accepted Answer

Economic theory assumes that individuals are purely self-interested and will act to maximize their own benefit. However, the fact that player A consistently offers over $10 to player B suggests that they are considering fairness and the well-being of others, which goes against the assumption of pure self-interest. Therefore, player A is not acting as economic theory usually assumes. However, the fact that player A offers over $10 to player B because it seems more fair suggests that player A is still influenced by social norms and expectations of fairness, which is why they make such offers. Therefore, choice C is the best fit.

Question 13

Conventional economic theory suggests that in the ultimatum game,the player proposing a split of $50 will propose that she get $49 and that the other player get $1.By the same reasoning,if the amount to be split is $1000,the player proposing the split will propose that she gets

Accepted Answer

Conventional economic theory suggests that the proposing player will offer a split that is slightly biased in their favor, but not so much that the other player will reject the offer. In the case of $1000, offering to split $999 and $1 is the most likely to be accepted by the other player while still maximizing the proposing player's share.

Question 14

Advocates of a tax on soda and other sugary drinks argue that such a tax

Accepted Answer

A tax on soda and other sugary drinks may encourage better nutrition by making these drinks less appealing or less affordable, thus encouraging consumers to opt for healthier alternatives. It can also protect our future selves from the long run negative effects of consuming these drinks, such as obesity, type-2 diabetes, and cardiovascular disease. Additionally, the tax is needed because people tend to behave inconsistently over time, often choosing immediate gratification over long-term health benefits.

Question 15

According to one survey 76 percent of Americans said they were not saving enough for retirement.This example of inconsistency over time

Accepted Answer

The inconsistency over time is likely due to the fact that saving for retirement requires sacrificing consumption in the present for a future reward, which can be difficult for many people to do consistently. This is a common behavioral bias known as present bias, where people tend to prioritize immediate gratification over long-term benefits.

Question 16

Eli and Peyton are playing the ultimatum game,starting with $100.The coin flip results in Eli being the one to propose a division of the $100.If Eli acts as experimental evidence shows,he will likely propose that

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The answer of Eli and Peyton are playing the ultimatum...

Question 17

Experiments show that when real people play the ultimatum game,starting with $100,

Accepted Answer

Studies have shown that in the Ultimatum Game, many players who are given $100 to split between themselves and another player offer more than half of the money to the other player, even though they could technically offer just $1 and keep $99 for themselves. However, this generosity has its limits. If Player A offers too little (say, $10), Player B is likely to reject the offer out of a sense of fairness. On the other hand, if Player A offers too much (say, $90), they risk losing out on a large amount of money. Research has shown that the sweet spot for proposals is typically around 40% of the total amount, or $40 in this case. So, if Player A offers $40, it is likely that Player B will accept the offer.

Question 18

Mankiw argues that a primary difference between taxing products like gasoline and taxing soda and other sugary drinks is that

Accepted Answer

Mankiw argues that taxing gasoline is more justifiable than taxing soda and other sugary drinks because consumption of gasoline causes negative externalities on society (such as pollution), while consumption of soda primarily affects the consumer. Therefore, the tax on gasoline can be seen as a way to internalize the costs of these negative externalities and incentivize individuals to use less gasoline, while a tax on soda may be seen as a way for the government to generate revenue rather than address externalities.

Question 19

Evidence points to the fact that,in the real world,people appear to care about fairness

Accepted Answer

Research has shown that people are willing to sacrifice their own self-interest in order to achieve fairness or equity, even in situations where it would be more advantageous for them to act selfishly. This suggests that people genuinely care about fairness, even when it does not coincide with their own self-interest.

Question 20

Anthony and Addie are playing the ultimatum game,starting with $100.The coin flip results in Anthony being the one to propose a division of the $100.Anthony proposes that he gets $99 and Addie gets $1.Which of the following statements is correct?

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The answer of Anthony and Addie are playing the ultimatum...

Quiz 22: Frontiers of Microeconomics