Question 1

Not buying junk food while doing the weekly shopping and forcing an extra trip to the store to acquire it is an example of:

Accepted Answer

A)   increasing the cost of a vice.
B)   a commitment device.
C)   how people compensate for time-inconsistent decisions.
D)   All of these are true.

Question 2

When people forget that money is ____________ they often make ______________ decisions.

Accepted Answer

A)   fungible; liquid
B)   fungible; irrational
C)   liquid; irrational
D)   liquid; rational

Question 3

John has $4000 in savings to buy an engagement ring for his girlfriend even though he has no plans to propose in the near future.When his transmission needs to be replaced in his car,John charges the $2000 worth of auto repair.John's decision is an example of:

Accepted Answer

A)   people recognizing that money is fungible.
B)   everyday expenses being easier to charge than big purchases.
C)   people making false distinctions about their money.
D)   over consumerism.

Question 4

Grace just got her first cell phone,an iPhone,for graduation.She tosses her iTouch in a drawer and never touches it again,even though she could easily sell it for $75 on Craigslist.Grace's choice is ___________ because ________________.

Accepted Answer

A)   rational; she weighs the $200 she paid for the iTouch and the $75 she could sell it for now
B)   irrational; she weighs the $200 she paid for the iTouch and the $75 she could sell it for now
C)   rational; she would not pay $75 to buy the iTouch today
D)   irrational; she would not pay $75 to buy the iTouch today

Question 5

A commitment device is:

Accepted Answer

A)   an arrangement entered into by an individual with the aim of helping fulfill a plan for future behavior that would otherwise be difficult.
B)   a way to deal with time inconsistency.
C)   something that helps people conquer their vices.
D)   All of these are true.

Question 6

An example of a commitment device for Jane,who says she really wants to save more would be:

Accepted Answer

A)   an agreement that she give any new clothes, jewelry, or makeup purchases to her best friend, and Jane is not allowed to borrow them.
B)   a commitment to only buy things on sale.
C)   a decision to cook her own food and not order take-out or delivery food unless she is too busy.
D)   buying a piggy bank to store savings.

Question 7

Beth really wants to get in shape,but just can't seem to ever get herself to the gym.An example of a commitment device Beth could use would be:

Accepted Answer

A)   to spend time before going to the gym doing something she really enjoys doing, like seeing a movie.
B)   to allow herself one dessert for each visit to the gym.
C)   to make arrangements to meet with an exercise buddy every day at the gym to work out together.
D)   None of these is a commitment device.

Question 8

People consistently consider sunk costs when weighing the trade-offs involved in a decision because:

Accepted Answer

A)   they are rational.
B)   they are utility-maximizers.
C)   they think at the margin.
D)   they find it hard to accept their losses.

Question 9

Howie just bought a new digital camera to replace his old one.His old one works perfectly fine and would sell on Craigslist for $100.The fact that Howie would not pay $100 for it,yet continues to let it sit in his closet unused is explained by:

Accepted Answer

A)   the implicit cost of ownership.
B)   the explicit cost of ownership.
C)   the explicit cost of sales.
D)   ignoring sunk costs.

Question 10

Which of the following is not an example of a fungible good?

Accepted Answer

A)   Cars
B)   Wheat
C)   Gold
D)   All of these are fungible commodities.

Question 11

In economics,we assume a rational person will choose to do an activity:

Accepted Answer

A)   if the opportunity costs outweigh the benefits of doing so.
B)   if the sunk costs outweigh the benefits of doing so.
C)   if the sunk and opportunity costs combined outweigh the benefits of doing so.
D)   if the opportunity costs do not outweigh the benefits of doing so.

Question 12

When people refuse to pay down debt with their savings:

Accepted Answer

A)   they are forgetting that money is fungible.
B)   they will be poorer in the long run.
C)   they are acting irrationally.
D)   All of these are true.

Question 13

Rick finds a great Internet deal on an all-inclusive vacation rental in the Tropics for $1200,and immediately places a $1000 nonrefundable deposit on it.He later learns that the dates he planned to go are right in the middle of hurricane season,and it is likely to be miserable and potentially dangerous weather the entire time.Rick decides he cannot waste the $1000 and takes the trip anyway.While sitting in the rain,miserable,Rick realizes he should have:

Accepted Answer

A)   ignored his sunk cost of $1200 and skipped the trip.
B)   ignored his sunk cost of $1000, and skipped the trip.
C)   hired a lawyer for $1000 to go to court and try to get his deposit back.
D)   hired a lawyer for $1000 to sue the travel agency.

Question 14

Economists believe:

Accepted Answer

A)   every choice has a sunk cost.
B)   only some choices have an opportunity cost.
C)   every choice has an opportunity cost.
D)   sunk costs are a figment of most people's imagination.

Question 15

The implicit cost of ownership:

Accepted Answer

A)   is a cognitive bias if it goes ignored.
B)   leads people to value things more once they possess them.
C)   is a nonmonetary opportunity cost that is often overlooked.
D)   All of these are true.

Question 16

Steve is finding it impossible to get over his most recent break-up and finds himself talking about her constantly.An example of a commitment device that Steve could use to get over her would be:

Accepted Answer

A)   to allow Steve's best friend to punch him in the arm any time he mentions her name.
B)   to take a cold shower every morning.
C)   to start dating someone else.
D)   None of these is a commitment device.

Question 17

Which of the following is not an example of a fungible commodity?

Accepted Answer

A)   Wheat
B)   Electricity
C)   Money
D)   All of these are fungible commodities.

Question 18

The idea of time inconsistency explains procrastination by:

Accepted Answer

A)   recognizing that we have several modes of decision making, and the less time we have to react, the worse the decision is.
B)   recognizing that our ability to remember long-term benefits when making decisions diminishes the closer the action becomes.
C)   recognizing that we have two modes of decision making, a "future-oriented" and a "present-oriented" self, who have conflicting objectives.
D)   recognizing that we never take long-term benefits into account.

Question 19

Behavioral economics:

Accepted Answer

A)   draws on insights from psychology to expand models of individual decision making.
B)   draws on insights from anthropology to clarify models of individual decision making.
C)   draws on insights from business theory to expand models of household behavior.
D)   is the least disputed field of economics.

Question 20

Sadie just bought a new karaoke machine to replace her old one.Her old one works perfectly fine and would sell on Craigslist for $50.The fact that Sadie would not pay $50 for it,yet continues to let it sit in her closet unused is explained by:

Accepted Answer

A)   the implicit cost of ownership.
B)   the cost of admitting she likes karaoke.
C)   ignored sunk costs.
D)   irrationally considering sunk costs.

Exam 8: Behavioral Economics: A Closer Look at Decision Making

When people forget that money is they often make __ decisions.

Correct Answer
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An example of a commitment device for Jane,who says she really wants to save more would be:

Correct Answer
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A commitment device is:

Correct Answer
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Steve is finding it impossible to get over his most recent break-up and finds himself talking about her constantly.An example of a commitment device that Steve could use to get over her would be:

Correct Answer
verified

When people refuse to pay down debt with their savings:

Correct Answer
verified

Correct Answer
verified

Which of the following is not an example of a fungible good?

Correct Answer
verified

Which of the following is not an example of a fungible commodity?

Correct Answer
verified

Sadie just bought a new karaoke machine to replace her old one.Her old one works perfectly fine and would sell on Craigslist for $50.The fact that Sadie would not pay $50 for it,yet continues to let it sit in her closet unused is explained by:

Correct Answer
verified

People consistently consider sunk costs when weighing the trade-offs involved in a decision because:

Correct Answer
verified

In economics,we assume a rational person will choose to do an activity:

Correct Answer
verified

Beth really wants to get in shape,but just can't seem to ever get herself to the gym.An example of a commitment device Beth could use would be:

Correct Answer
verified

Behavioral economics:

Correct Answer
verified

John has $4000 in savings to buy an engagement ring for his girlfriend even though he has no plans to propose in the near future.When his transmission needs to be replaced in his car,John charges the $2000 worth of auto repair.John's decision is an example of:

Correct Answer
verified

Grace just got her first cell phone,an iPhone,for graduation.She tosses her iTouch in a drawer and never touches it again,even though she could easily sell it for $75 on Craigslist.Grace's choice is _ because ______.

Correct Answer
verified

Economists believe:

Correct Answer
verified

Howie just bought a new digital camera to replace his old one.His old one works perfectly fine and would sell on Craigslist for $100.The fact that Howie would not pay $100 for it,yet continues to let it sit in his closet unused is explained by:

Correct Answer
verified

Not buying junk food while doing the weekly shopping and forcing an extra trip to the store to acquire it is an example of:

Correct Answer
verified

The idea of time inconsistency explains procrastination by:

Correct Answer
verified

The implicit cost of ownership:

Correct Answer
verified

Exam 8: Behavioral Economics: A Closer Look at Decision Making

When people forget that money is ____________ they often make ______________ decisions.

Correct AnswerverifiedShow Answer

An example of a commitment device for Jane,who says she really wants to save more would be:

Correct AnswerverifiedShow Answer

A commitment device is:

Correct AnswerverifiedShow Answer

Steve is finding it impossible to get over his most recent break-up and finds himself talking about her constantly.An example of a commitment device that Steve could use to get over her would be:

Correct AnswerverifiedShow Answer

When people refuse to pay down debt with their savings:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not an example of a fungible good?

Correct AnswerverifiedShow Answer

Which of the following is not an example of a fungible commodity?

Correct AnswerverifiedShow Answer

Sadie just bought a new karaoke machine to replace her old one.Her old one works perfectly fine and would sell on Craigslist for $50.The fact that Sadie would not pay $50 for it,yet continues to let it sit in her closet unused is explained by:

Correct AnswerverifiedShow Answer

People consistently consider sunk costs when weighing the trade-offs involved in a decision because:

Correct AnswerverifiedShow Answer

In economics,we assume a rational person will choose to do an activity:

Correct AnswerverifiedShow Answer

Beth really wants to get in shape,but just can't seem to ever get herself to the gym.An example of a commitment device Beth could use would be:

Correct AnswerverifiedShow Answer

Behavioral economics:

Correct AnswerverifiedShow Answer

John has $4000 in savings to buy an engagement ring for his girlfriend even though he has no plans to propose in the near future.When his transmission needs to be replaced in his car,John charges the $2000 worth of auto repair.John's decision is an example of:

Correct AnswerverifiedShow Answer

Grace just got her first cell phone,an iPhone,for graduation.She tosses her iTouch in a drawer and never touches it again,even though she could easily sell it for $75 on Craigslist.Grace's choice is ___________ because ________________.

Correct AnswerverifiedShow Answer

Economists believe:

Correct AnswerverifiedShow Answer

Howie just bought a new digital camera to replace his old one.His old one works perfectly fine and would sell on Craigslist for $100.The fact that Howie would not pay $100 for it,yet continues to let it sit in his closet unused is explained by:

Correct AnswerverifiedShow Answer

Not buying junk food while doing the weekly shopping and forcing an extra trip to the store to acquire it is an example of:

Correct AnswerverifiedShow Answer

The idea of time inconsistency explains procrastination by:

Correct AnswerverifiedShow Answer

The implicit cost of ownership:

Correct AnswerverifiedShow Answer

When people forget that money is they often make __ decisions.

Correct Answer
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Grace just got her first cell phone,an iPhone,for graduation.She tosses her iTouch in a drawer and never touches it again,even though she could easily sell it for $75 on Craigslist.Grace's choice is _ because ______.

Correct Answer
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Correct Answer
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