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MP gedragseconomie
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Multiple choice questions with feedback. Questions from the book which she used to build up her powerpoint.
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GEDRAGSECONOMIE/BEHAVIOURAL ECONOMICS
2020-2021
EXAMPLES MULTIPLE CHOICE QUESTIONS
CHAPT 1
The standard economic model assumes people are:
Rational
Boundedly rational
Altruistic
Emotional
It assumes people are selfish and rational
Why are multiple equilibria a problem for the stander economic model?
The standard economic model cannot be solved.
It is ambiguous what a rational person would do
It is not a problem
There is only ever one equilibrium
Game theory has shown that there are many equilibria in most
situations. No amount of ‘armchair’ reasoning is going to tell us which
equilibrium people most often play, if any.
What is the methodology of positive economics?
Models should say what is optimal for a person to do
Models should be as realistic as possible
Models should be judged on their assumptions
Models should be judged on their ability to predict
The methodology of positive economics says that predictions are what
matter. A model that makes good predictions is a good model.
The standard economic model assumes people are:
Kind
Boundedly rational
Fair
Selfish
Which of the following statements is correct about BE?
It builds upon the stander economic model
It does not use the methodology of positive economics
It rejects the standard economic model
It is the same as economic psychology
Behavioral economics takes the standard economic model as its
starting point.
,An experiment is single blind if:
The experimenter does not know what treatment is being run
The subjects do not know which treatment is being run
Subjects are deceived
Subject are not deceived
Subjects cannot know what treatment is being run without deception.
What is a Nash equilibrium?
A strategy for each player such that total payoffs are maximized
A strategy for a person such that the person maximizes payoff given
the strategies of others
A strategy that maximizes payoff
A strategy for each person such that everyone maximizes
payoff given the strategies of others
A Nash equilibrium details a strategy for every person. It need not be
the Pareto optimal outcome.
An outcome is pareto efficient if:
No person can be made better off without making someone
worse off
Everybody can be made better off
At least one person can be made better off
Every person maximizes payoff given the payoff of others
A Pareto efficient outcome need not be a Nash equilibrium
What is the discovered preference hypothesis?
Given time to learn people do not converge on the predictions of
the standard economic model
People more often than not do as predicted by the standard
economic model
Given time to learn people converge on the predictions of
the standard economic model
People rarely do as predicted by the standard economic model
The discovered preference hypothesis defends the standard economic
model on the basis it predicts well what experienced people do.
CHAPT 2
Which of the following is correct?
The WTP typically exceeds the WTA
The WTA typically exceeds the WTP
The WTA typically equals the WTP
The WTA is typically larger as it is frames valuation in terms of losing
the good while WTP is framed in terms of losing money. People are willing
to pay less to keep a good than they require compensation to lose the
good.
, Barbara was looking for a new pair of shoes. There were four options. She
didn’t choose the first pair because it was too expensive. She didn’t
choose the second because of the color. She didn’t choose the third
because of the fit. This looks like:
Satisficing
Trade-off contrast
Elimination by aspects
Directed cognition
Barbara is eliminating shoes by aspect. The first fails the price aspect,
the second the color aspect.
Andrew won a mug at the local fair. Someone offered to buy it off him for
$10 but he said no, despite never once using the mug. This is an example
of:
Hedonic editing
Endowment effect
Money illusion
Choice bracketing
Andrew would never have bought the mug for $10. But, he is reluctant
to sell because he feels ownership over the mug and so values it more
highly. This is the endowment effect.
Which of the following is not true of the 1/n heuristic?
An investor splits his money equally amongst the available funds
It is a diversification strategy
An investor splits his money equally amongst equity and
bond funds
It can lead to a portfolio biased towards equity
If a majority of the funds are equity funds the investor will end up
investing more in equity. Similarly, if the majority of the funds are bond
funds the investor will end up investing more in bonds.
What is the law of one price?
Identical items should be sold at the same price
In a double auction there is only one price
Whenever a good is sold the price is negotiated
Identical items often sell at different prices
Identical items often are sold at different prices, but this is a violation of
the law of one price.
In a posted offer market institution:
Buyers and sellers haggle over the price
Buyers and sellers submit bids and asks to a central clearing house
The seller sets a take it or leave it offer to buyers
Potential buyers submit bids and the highest bidder wins
This is the market institution familiar in most shops
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