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ECON 200 Final Review Questions and
Correct Answers
A company has a 401(k) savings plan for its employees. According
to behavioral economics, the participation rate will be about the
same whether people are given an easy enrollment form to fill out
or are enrolled automatically but given an easy opt-out form to
complete if they don't want to participate.
(a) True
(b) False
(c) We cannot be sure Ans: (b) false
Two people are playing an ultimatum game with $100. Player 1 can
make an offer to Player 2, who can either accept or reject it. If
Player 2 accepts, then they split the money according to Player 1's
offer. If Player 2 rejects, neither of them get any money. Player 1
offers $2 to Player 2. What does traditional economic theory say
Player 2 will do?
(a) Accept, because $2 is better than nothing.
(b) Not accept, because $2 is not worth bothering with.
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(c) Not accept, because the distribution ($98 for player 1 and $2
for player 2) is unfair. Ans: (a) Accept, because $2 is better than
nothing.
The video we watched about the "Second Cheapest Wine" was
about
(a) intertemporal decision making.
(b) the status quo bias.
(c) framing.
(d) maximizing expected value. Ans: (c) framing.
A flipped coin lands on heads five times in row. Jaime believes the
sixth flip will almost certainly land tails. Jaime is showing an
example of: _____________.
(a) bad decision-making
(b) imperfect information
(c) the hot hand fallacy
(d) the gambler's fallacy Ans: (d) the gambler's fallacy
What is an explanation for bounded rationality (also called limited
reasoning)?
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(a) People like to take risks.
(b) People often have incomplete information and limited decision-
making time.
(c) People really are not concerned with utility maximization.
(d) People don't know their own preferences. Ans: (b) People often
have incomplete information and limited decision-making time.
Loss-aversion tends to cause people to:
(a) ignore wins completely and only focus on the negative effects
of losses.
(b) behave too conservatively and not take enough risks.
(c) gamble only when they can afford to play.
(d) live boring lives. Ans: (b) behave too conservatively and not
take enough risks.
The ultimatum game shows that people care about:
(a) fairness of payoffs.
(b) uncertainty of payoffs.
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(c) long run payoffs.
(d) certainty of payoffs. Ans: (a) fairness of payoffs.
What is true about risks, risk-taking, and risk preference?
(a) Risk preferences vary among different people
(b) Risk-averse people will never engage in an activity with an
uncertain outcome
(c) All activities involve probability and risk
(d) People never change their risk preferences Ans: (a) Risk
preferences vary among different people
Repeated attempts by the US Treasury Department to introduce a
$1 coin have met with strong public resistance. The public simply
won't carry the $1 coin around even though it would save the
government billions of dollars (since $1 coins last much longer
than $1 bills). What concept from behavioral economics helps to
explain this?
(a) The priming effect.
(b) The status quo bias.
(c) Risk aversion.
© 2025 All rights reserved
ECON 200 Final Review Questions and
Correct Answers
A company has a 401(k) savings plan for its employees. According
to behavioral economics, the participation rate will be about the
same whether people are given an easy enrollment form to fill out
or are enrolled automatically but given an easy opt-out form to
complete if they don't want to participate.
(a) True
(b) False
(c) We cannot be sure Ans: (b) false
Two people are playing an ultimatum game with $100. Player 1 can
make an offer to Player 2, who can either accept or reject it. If
Player 2 accepts, then they split the money according to Player 1's
offer. If Player 2 rejects, neither of them get any money. Player 1
offers $2 to Player 2. What does traditional economic theory say
Player 2 will do?
(a) Accept, because $2 is better than nothing.
(b) Not accept, because $2 is not worth bothering with.
© 2025 All rights reserved
, 2 | Page
(c) Not accept, because the distribution ($98 for player 1 and $2
for player 2) is unfair. Ans: (a) Accept, because $2 is better than
nothing.
The video we watched about the "Second Cheapest Wine" was
about
(a) intertemporal decision making.
(b) the status quo bias.
(c) framing.
(d) maximizing expected value. Ans: (c) framing.
A flipped coin lands on heads five times in row. Jaime believes the
sixth flip will almost certainly land tails. Jaime is showing an
example of: _____________.
(a) bad decision-making
(b) imperfect information
(c) the hot hand fallacy
(d) the gambler's fallacy Ans: (d) the gambler's fallacy
What is an explanation for bounded rationality (also called limited
reasoning)?
© 2025 All rights reserved
, 3 | Page
(a) People like to take risks.
(b) People often have incomplete information and limited decision-
making time.
(c) People really are not concerned with utility maximization.
(d) People don't know their own preferences. Ans: (b) People often
have incomplete information and limited decision-making time.
Loss-aversion tends to cause people to:
(a) ignore wins completely and only focus on the negative effects
of losses.
(b) behave too conservatively and not take enough risks.
(c) gamble only when they can afford to play.
(d) live boring lives. Ans: (b) behave too conservatively and not
take enough risks.
The ultimatum game shows that people care about:
(a) fairness of payoffs.
(b) uncertainty of payoffs.
© 2025 All rights reserved
, 4 | Page
(c) long run payoffs.
(d) certainty of payoffs. Ans: (a) fairness of payoffs.
What is true about risks, risk-taking, and risk preference?
(a) Risk preferences vary among different people
(b) Risk-averse people will never engage in an activity with an
uncertain outcome
(c) All activities involve probability and risk
(d) People never change their risk preferences Ans: (a) Risk
preferences vary among different people
Repeated attempts by the US Treasury Department to introduce a
$1 coin have met with strong public resistance. The public simply
won't carry the $1 coin around even though it would save the
government billions of dollars (since $1 coins last much longer
than $1 bills). What concept from behavioral economics helps to
explain this?
(a) The priming effect.
(b) The status quo bias.
(c) Risk aversion.
© 2025 All rights reserved
