Feedback — Week 2 Lecture Quiz
You got a score of 8.75 out of 15.00
Question 1
What makes it harder for people to think in terms of opportunity cost?
Your Answer
Score
We would rather consider the shadow value of price.
Getting paid more frequently (having a salary broken down into monthly or bi-weekly payments).
Uncertainty about how much money we’ll need in the distant future.
Correct
1.00
Inexperience with money.
Total
1.00 / 1.00
Explanation
Question 2
Why might people be more willing to earn a tangible good like a $3 cappuccino than $3 in cash?
Your Answer
Score
The cappuccino has a lower opportunity cost than cash.
They are sleepy and need caffeine more urgently than they need money.
Inorrect
0.00
People often place a higher value on specific items than on the monetary value of those items.
Everyone prefers a macchiato to a cappuccino.
Total
Question 3
How do people tend to think about money?
0.00 / 1.00
Explanation
Your Answer
Score
Explanation
In absolute terms
In rhetorical terms
As fungible
In mental accounts
Total
Correct
1.00
1.00 / 1.00
Question 4
What happens as the absolute value of one’s salary increases? What is the psychological effect of increasing monetary payments?
Your Answer
Score
Explanation
We are less likely to divert money into savings accounts.
Inorrect
0.00
The same absolute amount of a salary increase has different psychological implications for different starting salaries.
We experience diminishing returns, where we are less likely to return an item to a store if we bought it on sale.
The psychological intensity grows exponentially.
Total
0.00 / 1.00
Question 5
When would an increase in the pain of paying be beneficial?
Your Answer
When one is a dinner guest at a friend’s house
Score
Explanation
Correct
When people want to minimize consumption
1.00
Gift-giving, a situation where you want to make sure that the recipient feels a little twinge so that they value the gift
more highly
When people want to spend more money
Total
1.00 /
1.00
Question 6
How can mental accounting be good for us?
Your Answer
It allows us to make financial decisions more manageable.
It helps us think more rationally about opportunity cost.
Score
Correct
1.00
Explanation
It isolates our willingness to pay from the cost of items.
It trains us to save more and spend less.
Total
1.00 / 1.00
Question 7
Which approach does Dan think will work best as a way to help us deal with money?
Your Answer
Score
Fixing market failures.
Assuming perfect rationality.
Capitalizing on existing patterns of how people treat money.
Correct
1.00
Explanation
Installing money management software in the computers of irrational people.
Total
1.00 / 1.00
Question 8
Our ideas about fairness make us . . .
Your Answer
Score
outraged when costs are manipulated to take advantage of our willingness to pay.
readily seek alternative options when a fair option is presented.
less willing to pay for conspicuous effort than for expertise.
underestimate marginal costs when they are salient.
Inorrect
0.00
Explanation
Total
0.00 / 1.00
Question 9
If everyone does what’s best for himself or herself . . .
Your Answer
there will likely be costs to society.
Score
Correct
1.00
everyone will be happier.
the individual will always be better off, but society as a whole may suffer.
the invisible hand will correct all market forces.
Total
1.00 / 1.00
Explanation
Question 10
What is loss aversion?
Your Answer
An irrational response to the probabilities of gains and losses.
Score
Correct
1.00
The root of the hindsight bias, where people tend to see past events as being predictable after they have occurred.
A horrible mess that no one has been able to figure out.
An accurately calculated response to the probability of gains and losses.
Total
Question 11
What is the endowment effect?
1.00 / 1.00
Explanation
Your Answer
Score
Explanation
It’s the opposite of jealousy.
It’s the attitude of entitlement we get when we are living off of unearned income.
Inorrect
0.00
When we own something, we focus on what we would give up rather than what we could gain by exchanging or selling
it.
It’s the opposite of contentment.
Total
0.00 /
1.00
Question 12
What is likely to happen when you offer someone money to do something he or she would be willing to do for free?
Your Answer
Score
Explanation
You might have to pay a substantial amount of money to make up for the conflict between social and market norms.
You will go bankrupt because of your overblown generosity.
The person is likely to reciprocate by offering you money to do something else.
Your relationship with the person will be likely to improve greatly.
Inorrect
Total
0.00
0.00 / 1.00
Question 13
When would you want social norms, rather than market norms, to dominate?
Your Answer
When you want the most fiscally efficient type of transaction.
Score
Explanation
When you want someone to do more than you can afford to pay them for.
Correct
1.00
When you are trying to carry out a simple monetary transaction.
When you want to get something for nothing.
Total
1.00 / 1.00
Question 14
What’s different about the way we treat things that are free?
Select all correct options, and consider each option individually.
Your Answer
We forget to compare the price difference to the quality difference when things are free.
Score
Correct
0.25
Explanation
We are far more likely to take something that is free than to pay for something—even when we prefer the item that
isn’t free.
We are more likely to abuse products that we have paid for because we consider them to be ours.
We realize that free things may not be as good as those that come with a price and are usually willing to pay for the
difference in quality.
Total
Correct
0.25
Correct
0.25
Inorrect
0.00
0.75 /
1.00
Question 15
What happened in the micro-pricing experiment where cartoons were the most expensive, news and sports were cheaper, and “postmodern literature” was free?
Your Answer
People who selected things to read with micro-payment on demand spent the least but were most miserable.
Score
Explanation
All the participants showed that they preferred comics to “post-modern literature.”
Micro-payment on demand made people read only what was very important or enjoyable to them.
Inorrect
0.00
Those who prepaid spent less than those who paid at the end.
Total
0.00 / 1.00