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1 | |
Which comment best describes the purpose of Chapter 8 on cognitive limitations that affect behaviour? |
| | A) | The integration of psychology into economics presents us with an entirely new way of doing economics. The old methods of rational choice are essentially obsolete. |
| | B) | Understanding our cognitive limitations will help us understand an area of our behaviour that rational-choice models cannot deal with effectively. |
| | C) | The power of rational choice analysis is especially evident in the area of cognitive limitations, because it predicts well even when people behave in clearly irrational ways. |
| | D) | Other social sciences like psychology study human behaviour in order to describe and explain behaviour. Only economists build models that are designed to predict what people will do. |
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2 | |
Which of the following best explains why people who budget carefully tend to spend less money? |
| | A) | Bounded rationality |
| | B) | The asymmetric value function |
| | C) | Hedonic framing |
| | D) | Out of pocket costs versus opportunity costs |
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3 | |
Which case best shows how marketing people use the asymmetric value function to their advantage. |
| | A) | They take full page ads on interior pages instead of half page ads on the front pages of sections. |
| | B) | They offer a "special deal" that is available for one day only rather than for an indefinite period of time. |
| | C) | They bundle items together so that the consumer must buy several things to get one item. |
| | D) | They give cash rebates rather than reduce the price of the item. |
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4 | |
If economists tend to be left-brained people, then |
| | A) | if you find a left-brained person and assume you have an economist, you are falling into the representativeness bias. |
| | B) | if you find an economist and assume you have a left-brained person, you are falling into the anchoring bias. |
| | C) | if a person is right-brained and an economist, he must have an asymmetric value function. |
| | D) | if a person is a right-brained economist, she will be more susceptible to the psychophysics of perception. |
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5 | |
Karl is a senior faculty member who bought his house 20 years ago. His neighbor, Carlos, just joined the faculty and for a similar house has mortgage payments that are three times what Karl pays. Recently Carlos commented that life would be so much easier if he had housing costs as low as Karl''s. This comment illustrates the problem of |
| | A) | considering out-of-pocket costs as full opportunity costs. |
| | B) | an asymmetric value function. |
| | C) | judgmental heuristics and biases. |
| | D) | the psychophysics of perception. |
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6 | |
Credit cards have reduced the pain of shopping, not only because they are convenient, but also because |
| | A) | of the initially steep slope of the value function for losses. |
| | B) | of the fact that credit card payments are not out of pocket losses. |
| | C) | people are risk averse. |
| | D) | the psychophysics of perception makes a $1000 bill seem small. |
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7 | |
A 5-handicap golfer shoots a 63 (9 strokes under par) and thinks, "I''ve finally turned the corner!" On his next 3 rounds, he shoots a 79, an 84, and a 78. Which concept does his experience illustrate? |
| | A) | psychophysics of perception. |
| | B) | regression to the mean |
| | C) | bias of representativeness |
| | D) | bounded rationality |
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8 | |
In an intermediate micro class, the tests seem to get progressively more difficult for the students as the course proceeds. The material builds and the concepts become more complicated. At the end of the course, some students are pleasantly surprised by their final course grade. What from this chapter might explain why they are surprised at how high a final grade they receive? |
| | A) | the concept of an asymmetric value function |
| | B) | the fact that earlier grades are sunk costs. |
| | C) | the idea of availability in memory as it relates to more recent events. |
| | D) | the fact that students are risk averse. |
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2002 McGraw-Hill Higher Education