Question 1

The Save More Tomorrow (SMarT) program, which offers employees the option to commit a fraction of future pay raises to a tax-free retirement savings account, is an example of a _______ commitment device that was _______.

Accepted Answer

A)  weak; successful
B)  strong; successful
C)  weak; unsuccessful
D)  strong; unsuccessfulE) A) and D)
F) C) and D)

Question 2

Commitment devices are:

Accepted Answer

A)  methods to increase the price of your vices.
B)  methods to lower the price of your virtues.
C)  successful whether weak or strong, depending on the situation.
D)  All of these are true.E) B) and C)
F) A) and B)

Question 3

Psychological research shows that choices that involve _______ are likely to turn out worse than those involving _______.

Accepted Answer

A)  complicated information; simple information
B)  simple information; complicated information
C)  low payoffs; high payoffs
D)  high payoffs; low payoffsE) A) and C)
F) A) and D)

Question 4

Disclosing information in more usable ways to decision-makers:

Accepted Answer

A)  can nudge people toward making better decisions.
B)  effectively eliminates certain choices from a person's options.
C)  will never affect a person's decision.
D)  increases instances of rational ignorance.E) A) and C)
F) A) and B)

Question 5

In the arena of decision-making, status quo bias means that the 'default' option:

Accepted Answer

A)  has a lot of power.
B)  is most likely to be chosen.
C)  will automatically take place if the chooser fails to make an active decision.
D)  All of these are true.E) B) and D)
F) None of the above

Question 6

The organization of the context and process in which people make decisions is called:

Accepted Answer

A)  political structure.
B)  choice architecture.
C)  ways and means theory.
D)  heuristics.E) A) and D)
F) A) and C)

Question 7

John wants to buy a scented candle for his girlfriend. He recalls that her perfume, shampoo, and body lotion all smell like flowers, so he decides to buy her a flower-scented candle. His behavior is driven by:

Accepted Answer

A)  a heuristic, because he is using a rule of thumb to make his decision.
B)  the endowment effect, because his girlfriend already owns flower-scented goods.
C)  loss aversion, because he doesn't want to make the wrong choice.
D)  status quo bias, because he decides not to deviate from his girlfriend's usual scent.E) A) and B)
F) A) and C)

Question 8

Time inconsistency describes:

Accepted Answer

A)  a situation in which we regret choices we make simply because of when we made the choice.
B)  a situation in which we change our minds about what we want simply because of the timing of the decision.
C)  our inability to correctly predict how current choices will affect us in the future.
D)  our inability to make choices today that determine our actions in the future.E) None of the above
F) C) and D)

Question 9

If choice architects frame choices in terms of social norms, people will:

Accepted Answer

A)  behave with the majority.
B)  be unaffected by what the majority is doing.
C)  behave in the opposite way, because uniqueness is celebrated in our culture.
D)  behave according to how they view that norm.E) B) and D)
F) A) and D)

Question 10

The average person is more likely to make a mistake choosing _______ than what to have for dinner, due to the complex nature of the topic.

Accepted Answer

A)  how to save for retirement
B)  which college to attend
C)  which type of health plan to choose
D)  All of these are true.E) None of the above
F) B) and D)

Question 11

Suppose you are purchasing a plane ticket. Airline A advertises that 9 out of 10 planes arrive on time. Airline B advertises that 1 out of 10 planes is delayed. Knowing that individuals are subject to _______, we would expect more people to purchase a plane ticket from Airline A.

Accepted Answer

A)  status quo bias
B)  time inconsistency
C)  framing bias
D)  anchoring biasE) A) and D)
F) B) and C)

Question 12

The implementation of choice architecture that alters people's behavior in a deliberate and predictable way without greatly changing economic incentives is called:

Accepted Answer

A)  influencing through choice.
B)  nudging.
C)  shifting.
D)  baiting.E) B) and C)
F) B) and D)

Question 13

People's preferences about the present are _______ with their preferences about the future, simply because future choices are _______.

Accepted Answer

A)  inconsistent; more distant
B)  consistent; more distant
C)  inconsistent; harder to predict
D)  consistent; easier to predictE) A) and B)
F) A) and C)

Question 14

Cutting up your credit cards in an effort to curb spending is an example of:

Accepted Answer

A)  status quo bias.
B)  a commitment device.
C)  the endowment effect.
D)  loss aversion.E) None of the above
F) B) and D)

Question 15

Choice architecture focuses on factors such as: the timing of choices. how different options are described. the default option.

Accepted Answer

A)  II only
B)  II and III only
C)  I and III only
D)  I, II, and IIIE) A) and C)
F) A) and B)

Question 16

The CARD Act, which requires credit card companies to disclose how long it willtake cardholders to pay off their debt if they only make minimum payments, is an example of:

Accepted Answer

A)  disclosing information in more usable ways.
B)  choice architecture that nudges people toward better decisions.
C)  how the presentation of information can affect people's choices.
D)  All of these are true.E) A) and C)
F) B) and C)

Question 17

An example of a heuristic is:

Accepted Answer

A)  predatory lending.
B)  a rule of thumb.
C)  common sense.
D)  a framing device.E) A) and B)
F) C) and D)

Question 18

By studying the effects of choice architecture, we can:

Accepted Answer

A)  expand the simplifying assumption that people always make the choices that are best for themselves.
B)  blend the ideas of psychology with core economic beliefs.
C)  be open to the possibility that we can no longer tell if someone is making a mistake or choosing something that is maximizing his utility.
D)  All of these are true.E) All of the above
F) B) and C)

Question 19

Your roommate tells you she's going to join the gym next week. A week and a half goes by and you ask her how the gym is going, and she tells you she's going to wait until the following week. Your roommate's preferences are:

Accepted Answer

A)  better today than tomorrow.
B)  time inconsistent.
C)  mistakes.
D)  considered bad choices.E) A) and B)
F) B) and D)

Question 20

Status quo bias is:

Accepted Answer

A)  when a person's choice is influenced by others' opinions.
B)  a reluctance to make active decisions to change something, even if it is fairly easy to do so.
C)  an unwillingness to change future decisions to match current choices.
D)  All of these are true.E) C) and D)
F) A) and B)

Exam 23: Public Policy and Choice Architecture

An example of a heuristic is:

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Your roommate tells you she's going to join the gym next week. A week and a half goes by and you ask her how the gym is going, and she tells you she's going to wait until the following week. Your roommate's preferences are:

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Choice architecture focuses on factors such as: the timing of choices. how different options are described. the default option.

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The average person is more likely to make a mistake choosing _______ than what to have for dinner, due to the complex nature of the topic.

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The implementation of choice architecture that alters people's behavior in a deliberate and predictable way without greatly changing economic incentives is called:

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The organization of the context and process in which people make decisions is called:

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Status quo bias is:

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Commitment devices are:

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The Save More Tomorrow (SMarT) program, which offers employees the option to commit a fraction of future pay raises to a tax-free retirement savings account, is an example of a _______ commitment device that was _______.

Correct AnswerverifiedShow Answer

Disclosing information in more usable ways to decision-makers:

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In the arena of decision-making, status quo bias means that the 'default' option:

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By studying the effects of choice architecture, we can:

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Suppose you are purchasing a plane ticket. Airline A advertises that 9 out of 10 planes arrive on time. Airline B advertises that 1 out of 10 planes is delayed. Knowing that individuals are subject to _______, we would expect more people to purchase a plane ticket from Airline A.

Correct AnswerverifiedShow Answer

Time inconsistency describes:

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Psychological research shows that choices that involve _______ are likely to turn out worse than those involving _______.

Correct AnswerverifiedShow Answer

People's preferences about the present are _______ with their preferences about the future, simply because future choices are _______.

Correct AnswerverifiedShow Answer

The CARD Act, which requires credit card companies to disclose how long it willtake cardholders to pay off their debt if they only make minimum payments, is an example of:

Correct AnswerverifiedShow Answer

John wants to buy a scented candle for his girlfriend. He recalls that her perfume, shampoo, and body lotion all smell like flowers, so he decides to buy her a flower-scented candle. His behavior is driven by:

Correct AnswerverifiedShow Answer

If choice architects frame choices in terms of social norms, people will:

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Cutting up your credit cards in an effort to curb spending is an example of:

Correct AnswerverifiedShow Answer

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The Save More Tomorrow (SMarT) program, which offers employees the option to commit a fraction of future pay raises to a tax-free retirement savings account, is an example of a _ commitment device that was _.

Correct Answer
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Psychological research shows that choices that involve _ are likely to turn out worse than those involving _.

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People's preferences about the present are _ with their preferences about the future, simply because future choices are _.

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