In Spain, people are considered organ donors unless the explicitly indicate they do not want to be. In the United States, people are only considered organ donors if they explicitly indicate they wish to be. Behavioral economics would suggest that A) everything else equal, the opt-in system of Spain would generate more organ donors as […]
In behavioral economics, the endowment effect refers to A) most people believe that most wealthy people inherit their wealth. B) many people would be indifferent between being endowed with money or knowledge. C) many people place a higher value on what they own than when they consider purchasing. D) most people respond to tax incentives […]
In behavioral economics, the term salience refers to A) relevance to the problem being investigated. B) people only consider information when it is conveyed in a subtle manner. C) how an experiment is designed. D) people consider information when it is presented in an “eye grabbing” manner. ANSWER D
Keith is indifferent between canned soup and fresh soup. In the figure above, Keith’s indifference curves are represented by I1, I2, I3, and I4 curves. Canned soup sells for $1 per serving and fresh soup sells for $2 per serving. What is Keith’s income? A) $8 B) $4 C) $2 D) $5 ANSWER B […]
Behavioral economics extends traditional economic models by A) including insights from psychology and human cognition models. B) modeling behavior rather than prices. C) admitting that individuals are irrational. D) admitting that incentives are very important. ANSWER A
Bounded rationality suggests that A) individuals might make “incorrect” decisions because they are unable to consider all possible options. B) individuals would rather have less choice to more choice. C) rational decisions can only be made when choices are restricted. D) individuals are happier when their choices are restricted or “bounded.” ANSWER A
Lisa consumes only pizzas (P) and burritos (B). Her utility function is U = P0.5 B0.5. The price of per pizza is $10 and the price per burrito is $5. In equilibrium, Lisa consumes 4 pizzas. Using Lisa’s utility function, calculate how many burritos she consumes. What will be an ideal response? ANSWER The […]
In behavioral economics, salience is best exemplified by A) consumers responding differently when posted prices increase rather than when prices increase because of sales tax increases. B) consumers responding the same regardless of how prices change. C) the end of a controlled experiment. D) consumers responding differently when income increases permanently rather than temporarily. […]
Consumers do not prefer gifts-in-kind to cash gifts. Indicate whether the statement is true or false ANSWER True . It is possible the consumer would buy the same gift with cash and therefore be just as well off. If the consumer bought something other than the gift, that means that this something else is […]
Behavioral economists use which technique to test economic theory? A) controlled experiments B) price theory C) environmental economics D) lie detector tests ANSWER A
