Deck 23: Public Policy and Choice Architecture

Question 1

Choice architecture is the:

A) organization of the context and process in which people make decisions.
B) choices that force utility-maximizing decisions for individuals.
C) political framework under which policy is made.
D) the internal mental framework people use in order to make all their decisions.

Answer 1

A

Question 2

By studying the effects of choice architecture,we can:

A) expand the simplifying assumption that people always make the choices that are best for themselves.
B) blend the ideas of psychology with core economic beliefs.
C) open the possibility that we can no longer tell if someone is making a mistake or choosing something that is maximizing his utility.
D) All of these statements are true.

Answer 2

D

Question 3

The SMarT program is designed to overcome which common barrier to saving? A.Status-quo bias
B)An unwillingness to forgo current consumption
C)The program was designed to overcome both A and B.
D)The program was designed to overcome neither A nor B.

Answer 3

C

Question 4

The program Save More Tomorrow (SMarT)is:

A) an experimental "forced savings" program.
B) the "forced savings" program in Italy.
C) a voluntary savings program that involves people learning how to find high-interest accounts so their savings is worth more tomorrow.
D) a voluntary savings program that commits a fraction of future raises to be put directly into savings.

Question 5

Neutral policy with respect to choice architecture is:

A) not a clear concept across different choice scenarios.
B) well established in all choice scenarios.
C) the goal of all choice architects.
D) generally regulated by state and federal government.

Question 6

The organization of the context and process in which people make decisions is called:

A) political structure.
B) choice architecture.
C) ways and means theory.
D) choice structure.

Question 7

The most common form of "forced savings" in the U.S.is:

A) Social Security.
B) FICA.
C) unemployment insurance.
D) Medicare.

Question 8

Status-quo bias is:

A) a person's choice being influenced by others' opinions.
B) a reluctance to make active decisions to change something, even if it is fairly easy to do so.
C) not overcome in the SMarT program because saving is not the default option.
D) All of these statements are true.

Question 9

The Save More Tomorrow (SMarT)program found all of the following except that:

A) people want to save more than they typically do.
B) participants quadrupled their savings in just a couple of years.
C) if the default choice is to save a portion of income, people will save more.
D) people were already saving at an optimal amount, so the program had no effect.

Question 10

Status-quo bias is:

A) a type of mental barrier to saving.
B) when people actively make decisions to change something, even if it is fairly difficult to do so.
C) not overcome in the SMarT program because saving is the default option.
D) when people have a negative view on the status quo.

Question 11

Choice architecture focuses on such factors as:

A) the timing of choices.
B) how different options are described.
C) Both A and B are true.
D) Neither A nor B is true.

Question 12

All of the following are traditional economic views except:

A) there is no such thing as a bad choice.
B) choice architecture is ineffective.
C) revealed preference shows researchers what the bad choices are.
D) choice architects have a responsibility to remain neutral when it comes to choices.

Question 13

When considering choice architecture,a nudge:

A) allows participants to choose among only choices that are good for them.
B) can sometimes accomplish public policy goals in a less expensive way than traditional methods.
C) presents choices that are similar to participants' ideal choices, but are slightly better than them.
D) is a deliberate push by choice architect to get all people to behave a certain way.

Question 14

The success of the SMarT program has proven that changing the way we present options can:

A) affect people's behavior.
B) help people overcome mental biases.
C) avoid regret.
D) All of these statements are true.

Question 15

When considering choice architecture,a nudge:

A) is a gentle push in a particular direction.
B) does not take away any options.
C) allows anyone who wants to go in a different direction to do so.
D) All of these statements are true.

Question 16

A mistake is a choice that:

A) the chooser later regrets.
B) the choice architect creates that has unintended consequences.
C) society as a whole, but not necessarily the chooser, is left worse-off once it's made.
D) policymakers think choosers should not make.

Question 17

A "bad choice" as defined in choice architecture is a choice that:

A) policymakers want to nudge participants away from.
B) is one that the chooser will regret later.
C) is considered not optimal by the choice architect.
D) policymakers consider not optimal for society, despite individual choosers' benefits.

Question 18

The implementation of choice architecture that alters people's behavior in a deliberate and predictable way without changing economic incentives much is called:

A) influencing through choice.
B) nudging.
C) shifting.
D) baiting.

Question 19

Choice architecture can:

A) alter actual decisions and thus the ultimate outcomes.
B) make it easier for people to make choices that will make them happier in the long run.
C) help people make better choices without eliminating free choice.
D) All of these statements are true.

Question 20

A choice architect is someone who:

A) determines which choices are available to builders in a specific area.
B) designs areas that have a lot of choices in determining how the space is used.
C) is in a position to shape the decision-making environment.
D) determines how people should make decisions inside of a specific environment.

Question 21

People's preferences about the present are ____________ with their preferences about the future,simply because the future choices are ____________.

A) inconsistent; more distant
B) consistent; more distant
C) inconsistent; harder to predict
D) consistent; easier to predict

Question 22

If you intend to begin jogging one week from today,and next week tell yourself you'll begin in another week,your preferences are:

A) revealed from your actions.
B) more accurate in the future.
C) irrational.
D) time inconsistent.

Question 23

In the arena of decision making,the choice that will automatically take place if the chooser fails to make an active decision is called the:

A) processing option.
B) default option.
C) choice option.
D) auto option.

Question 24

We're more likely to make mistakes with situations we face:

A) often, because we pay less attention.
B) often, because they involve low payoffs.
C) infrequently.
D) with little warning.

Question 25

When it's not clear how to translate available information into something personally meaningful,it's:

A) more likely you'll make a mistake in your choice.
B) less likely you'll make a mistake, given the amount of information.
C) more likely you'll invest more time in making your choice.
D) less likely the choice will have a big impact on you.

Question 26

Your roommate tells you she's going to join the gym next week.A week and a half goes by and you ask her how the gym is going,and she tells you she's going to wait until the following week.Your roommate's preferences are:

A) better today than tomorrow.
B) time inconsistent.
C) mistakes.
D) considered bad choices.

Question 27

The endowment effect is the tendency:

A) to place a higher value on something a person already owns simply because they own it.
B) to have a harder time parting with wealth people have held the longer the amount of time they hold it.
C) for a person to believe they hold a particular skill because someone told them they do.
D) for people to want to bestow their own beliefs on others when making decisions.

Question 28

Jim,an avid biker,broke his leg last year and will never be able to use his bike again.He was offered $100 for it last year,but Jim refused to sell it,insisting it was worth more.A year later,he's offered only $75 for it,but Jim still refuses to sell it.Jim's behavior could be explained by:

A) limited processing power.
B) the endowment effect.
C) status quo bias.
D) substitution effect.

Question 29

The term time inconsistency is used to describe:

A) a situation in which we regret choices we make simply because of when we made the choice.
B) a situation in which we change our minds about what we want simply because of the timing of the decision.
C) people's inability to correctly predict how their current choices will affect them in the future.
D) people's inability to make choices today that determine their actions in the future.

Question 30

When we study choice architecture,we recognize that people make:

A) choices that rarely maximize their well-being.
B) mistakes in seemingly random ways.
C) mistakes in common and predictable ways.
D) choices which always maximize their well-being.

Question 31

The average person is more likely to make a mistake choosing ___________ than what to have for dinner due to the complex nature of the topic.

A) how to save for retirement
B) which college to attend
C) which type of health plan to choose
D) All of these statements are true.

Question 32

The concept of loss aversion is:

A) preferring certain outcomes over uncertain ones.
B) a general tendency for people to put more effort into achieving gains than avoiding losses.
C) a general tendency for people to put more effort into avoiding losses than achieving gains.
D) a spectrum of tolerance for risky situations.

Question 33

An important category of bias in human decision making is:

A) temptation.
B) revealed preference.
C) ease of the decision-making process.
D) All of these are important sources of bias in decision making.

Question 34

In the arena of decision making,status-quo bias means that the "‘default'" option:

A) has a lot of power.
B) is most likely to be chosen.
C) is the one that will automatically take place if the chooser fails to make an active decision.
D) All of these statements are true.

Question 35

When shopping online,as part of the check-out process,companies often have a box checked automatically that states you want to receive promotional e-mails from them.The directions instruct you to uncheck the box if you do not wish such correspondence.This practice is a good example of:

A) status-quo bias.
B) endowment bias.
C) endowment effect.
D) time inconsistency.

Question 36

Choice architects know that whether something feels like a loss or gain often depends on how:

A) it is framed.
B) often the decision is made.
C) it is structured in terms of time to make the decision.
D) large the outcome is.

Question 37

Behavioral economists accept that people ___________ their well-being but sometimes ________________.

A) try to maximize; make mistakes
B) try to minimize; maximize it
C) try to maximize; maximize their bad choices
D) try to maximize; purposefully engage in less than optimal behavior.

Question 38

Psychological research shows that choices that involve ___________ are likely to turn out worse than those involving __________.

A) complicated information; simple information
B) simple information; complicated information
C) low payoffs; high payoffs
D) high payoffs; low payoffs

Question 39

Which of following is not an important category of bias in human decision making?

A) Temptation.
B) Limited processing power.
C) Reluctance to change.
D) Single-mindedness.

Question 40

A store is choosing between advertising a credit card fee or a discount for paying cash to its customers.People will care more about:

A) getting the discount rather than avoiding the fee.
B) avoiding the fee rather than getting the discount.
C) neither; since it's the same outcome, people won't care one way or another.
D) It is impossible to say without more information.

Question 41

Commitment devices can be:

A) a tool to help people avoid temptation.
B) an informal arrangement.
C) formal policies set up through an employer or third party.
D) All of these statements are true.

Question 42

The Save More Tomorrow (SMarT)program is an example of a:

A) weak commitment device that was successful.
B) strong commitment device that was successful.
C) weak commitment device that was unsuccessful.
D) strong commitment device that was unsuccessful.

Question 43

Commitment devices are:

A) methods to increase the price of your vices.
B) methods to lower the price of your virtues.
C) successful whether weak or strong, depending on the situation.
D) All of these statements are true.

Question 44

A person setting up automatic deductions through her employer so a portion of her pay goes into a "Christmas account" is an example of:

A) status quo bias.
B) the endowment effect.
C) positive framing.
D) a commitment device.

Question 45

A person cutting up her credit cards in an effort to curb her spending is an example of:

A) status quo bias.
B) a commitment device.
C) the endowment effect.
D) loss aversion.

Question 46

A heuristic is a:

A) positive-framing method.
B) mental shortcut that helps us make decisions.
C) method to increase the price of your vices.
D) formal policy used by firms to drive employee behavior.

Question 47

Commitment devices can be:

A) a way to use choice architecture to help you avoid temptation.
B) formal policies or products.
C) a way for people to voluntarily restrict their choices in order to make it easier to stick to plans.
D) All of these statements are true.

Question 48

Susie doesn't buy ice cream this week at the grocery store because she intends to start a diet in a few days.Her behavior is an example of:

A) a commitment device.
B) status quo bias.
C) the endowment effect.
D) positive framing.

Question 49

Jessica's workplace is collecting money for a lottery pool.Each employee can choose to contribute $50,with a 1 in 600,000 chance of winning $1 million.If Jessica chooses not to contribute to the lottery pool,she is probably experiencing:

A) positive framing.
B) the endowment effect.
C) loss aversion.
D) status quo bias.

Question 50

A person committing to carpool with a friend to the gym for daily workouts is an example of:

A) status quo bias.
B) the endowment effect.
C) a commitment device.
D) positive framing.

Question 51

Commitment devices:

A) need strong commitments that are hard to get out of in order to be successful.
B) are never strong commitments that are hard to get out of.
C) can be successful whether they have strong or weak commitments.
D) are only successful if they are weak commitments that are easy to change.

Question 52

Commitment devices are:

A) mechanisms that allow people to voluntarily restrict their choices in order to make it easier to stick to plans.
B) socially institutionalized practices that signal a particular commitment has been made by a person.
C) policies that force participants to choose their future commitments.
D) None of these statements is true.

Question 53

In terms of framing,we respond better to:

A) negative framing.
B) neither; research has shown that framing ultimately doesn't matter.
C) consistent framing.
D) positive framing.

Question 54

John is buying a scented candle for his girlfriend.John thinks about her flower-scented perfume,flower-scented air spray,and flower-scented shampoo.He decides to buy her a flower-scented candle.His behavior is:

A) using a heuristic called a rule of thumb.
B) an example of the endowment effect because she already has flower-scented goods.
C) an example of loss aversion because he doesn't want to make the wrong choice.
D) an example of status quo bias because he doesn't want to deviate from her normal choice of scent.

Question 55

A store is choosing between advertising a credit card fee or a discount for paying cash to its customers.More customers are likely to pay cash if the store owner advertises:

A) the credit card fee.
B) the discount for paying cash.
C) either one; since it's the same outcome, people won't care one way or another.
D) neither one; since people are not likely to pay cash more regardless of how it's advertised.

Question 56

If someone asked you to predict the price of gas in a month,and you decided to just guess by adding a few cents to the current price of gas,which you know,your answer would exhibit:

A) anchoring.
B) time inconsistency.
C) rational expectations.
D) transitivity.

Question 57

Suppose you were asked,"Can you guess the height of the tallest living man? Is it more than 8 feet?" When people suggest an answer in the question they ask,it is a form of:

A) anchoring.
B) rule of thumb.
C) time inconsistency.
D) positive framing.

Question 58

Cyndi says to you,"I'm wondering if I should study abroad in France." You studied in Germany two years ago,and found the cost of living (not counting tuition)to be about $5,000 for a semester,so you say,"I bet it will cost you about $5,000,not counting tuition." Your answer demonstrates:

A) biased expectations.
B) anchoring.
C) using a piece of information loosely related and applying it to your guess.
D) All of these statements are true.

Question 59

An example of a heuristic is:

A) predatory lending.
B) a rule of thumb.
C) common sense.
D) a framing device.

Question 60

Amanda is from Vermont and visiting California for the first time.At home,Amanda always goes jogging early in the morning because it's hottest in the early afternoon.Not knowing what to expect of the weather in California,she decides to go jogging in the early morning during her visit.This decision is an example of:

A) loss aversion.
B) status quo bias.
C) a heuristic.
D) positive framing.

Question 61

When it comes to figuring out who wants to be an organ donor,the answer depends on:

A) how you ask the question.
B) the default rule.
C) whether presumed consent exists in the organ donation program.
D) All of these statements are true.

Question 62

Disclosing information in more usable ways to decision-makers:

A) can decrease the occurrence of rational ignorance in decision-making.
B) can nudge people toward making better decisions.
C) has been useful to organizations like the EPA in getting desired outcomes, like people deciding to buy more gas-efficient cars.
D) All of these statements are true.

Question 63

If choice architects frame choices in terms of social norms people will:

A) behave with the majority.
B) be unaffected by what the majority is doing.
C) behave in the opposite way, because "going rogue" is celebrated in our culture.
D) behave according to how they view that norm.

Question 64

Informing people of social norms is likely to get:

A) more people to act that way, which is always positive.
B) more people to act that way, which can be a problem if policymakers are trying to change typical behavior.
C) more people to act that way, which is always negative.
D) less people to act that way, because people like to be unique.

Question 65

Once people hear what the majority of individuals like them are doing,they are most likely going to choose:

A) something better, because they typically want to be special.
B) something slightly worse, because they don't want to be taken advantage of.
C) the same, because they typically don't like to be outliers.
D) None of these is likely.

Question 66

A default rule:

A) is a consequence that users of commitment devices agree to if they fail to follow through with their commitment.
B) defines what will automatically occur if someone fails to make an active decision otherwise.
C) is a defined limit used to mark when someone is decidedly not making a good decision.
D) is the defined strength of a given commitment needed to get an individual to follow through with the commitment.

Question 67

Suggested donations on fundraising items sent to you in the mail is an example of:

A) loss aversion.
B) positive framing.
C) anchoring.
D) rule of thumb.

Question 68

The CARD Act,which tells credit card holders how long it will take to pay off their debt if they only make minimum payments,and how much they need to pay in order to pay off the debt in three years,is an example of:

A) disclosing information in more usable ways.
B) choice architecture that nudges people toward better decisions.
C) how the presentation of information can affect people's choices.
D) All of these statements are true.

Question 69

Knowing that most people do not care to be outliers,one way to get people to behave a certain way is to:

A) tell them everyone else does it.
B) let them know it is a social norm to behave that way.
C) encourage the behavior of the majority.
D) All of these statements are true.

Question 70

Choice architects are likely to make program participation:

A) lower, even if they frame it positively.
B) the default rule if they want low enrollment.
C) the default rule if they want high enrollment.
D) the status quo in order to entice high enrollment.

Question 71

When people make a decision to not participate in a program unless they actively enroll for it,program participation is:

A) likely to be higher than if people were automatically enrolled and had to actively opt-out of participating.
B) likely to be lower than if people were automatically enrolled and had to actively opt-out of participating.
C) likely to be the same as if people were automatically enrolled and had to actively opt-out of participating.
D) exclusive, which always makes it more attractive to people.

Question 72

Suppose studies showed that 12 percent of all teens choose to participate in underage drinking.If policymakers wish to reduce the amount of underage drinking,they should:

A) not share that statistic, and let teens think that it's a huge problem with all teens.
B) Informing them will have no impact on their individual behavior.
C) let teens know that the great majority of teens currently do not drink.
D) The statistic is likely to influence their personal decision, but it is impossible to predict in what way without more information.

Question 73

Suppose studies showed that only 15 percent of all teens wear their bike helmets while riding their bikes.If policymakers wish to have more teens wear their bike helmets,they should:

A) inform teens of the social norm.
B) not inform teens of the social norm.
C) Informing them of the social norm will have no impact on their individual situation.
D) The statistic is likely to influence their personal decision, but it is impossible to predict in what way without more information.

Question 74

Disclosing information in more usable ways to decision-makers:

A) can nudge people toward making better decisions.
B) effectively eliminates certain choices from a person's options.
C) will never affect a person's decision.
D) increases instances of rational ignorance.