MP gedragseconomie

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