Deck 8: Behavioral Economics: A Closer Look at Decision Making

Question 1

Luke won tickets to see a rock music concert.Even though Luke is a rhythm and blues fan,he goes to the concert anyway.Twenty minutes later,Luke decides he hates the music and the screaming fans,and he walks out an hour before the concert is scheduled to end.Luke's behavior demonstrates what economic concept?

A) Irrational behavior
B) Rational behavior
C) The fungibility of money
D) None of these explain Luke's behavior.

Answer 1

B

Question 2

Behavioral economics:

A) draws on insights from psychology to expand models of individual decision making.
B) draws on insights from anthropology to clarify models of individual decision making.
C) draws on insights from business theory to expand models of household behavior.
D) is the least disputed field of economics.

Answer 2

A

Question 3

Mark has $2000 saved for a trip at Spring Break.Over Winter Break,he decide to buy gifts for his family and puts over $500 on his credit card which charges 10% interest on the outstanding balance every month.He pays off the credit card bill gradually over the next two months.An economist would categorize that behavior as:

A) rational.
B) irrational.
C) misallocated.
D) scarce.

Answer 3

B

Question 4

Behavioral economists recommend mechanisms to help people actually do things they say they want to do but often don't.Such mechanisms are often called

A) savings rates.
B) charitable donations.
C) self-control.
D) commitment devices.

Question 5

In order to get children to eat all the food they've served,regardless of their hunger,mothers have relied for decades on the argument that "there are starving children in Africa." Assuming the presence of hungry children on another continent does not affect the utility you derive from the food on your plate,if you choose to force down food based on this argument,you are:

A) acting rationally.
B) caring more about starving children than your own well-being.
C) acting irrationally.
D) doing your part in the fight against world hunger.

Question 6

Someone saying that he wants to lose weight,but ordering dessert is an example of:

A) rational decision making.
B) rational behavior.
C) irrational behavior.
D) utility-maximizing behavior.

Question 7

One concept that behavioral economists use to account for procrastination is:

A) the time inconsistency of our decision-making.
B) the fungibility of money.
C) thinking inconsistently about prices.
D) framing bias.

Question 8

When people change their minds about what they want simply because of the timing of the decision,economists refer to it as:

A) time inconsistency.
B) information overload paradox.
C) cost-price inconsistency.
D) time barriers to optimization.

Question 9

Matt has $2000 saved for a trip at Spring Break.Over Christmas break he decides to spend $400 of it on gifts instead of putting the gifts on his credit card,thus avoiding interest charges.He gradually replaces it in his savings account over the next two months.An economist would say this behavior is:

A) rational.
B) irrational.
C) utility minimizing.
D) not observable.

Question 10

A typical behavior that violates the assumption of rational behavior is:

A) saying you want to lose weight, but ordering dessert.
B) being willing to pay more for something if you use a credit card than if you use cash.
C) stubbornly watching to the end of a movie you've decided you're not enjoying at all.
D) All of these demonstrate irrational behavior.

Question 11

Time inconsistency refers to a situation where:

A) we change our minds about what we want in response to gaining complete information.
B) we change our minds about what we want simply because of the timing of the decision.
C) we typically choose the same thing, regardless of when the decision is being made.
D) None of these statements is true.

Question 12

Joe walks into Best Buy prepared to spend no more than $500 cash on a new computer,but the price turns out to be $600.Joe is told if he finances it on a Best Buy credit card,it will cost $600,but he will get a $25 gift card free with the computer.Joe opts to open the credit card and puts the full $600 on the account.According to economic theory,Joe's decision is:

A) irrational.
B) rational.
C) budget-conscious.
D) optimal.

Question 13

Stan complains to his roommate that he never has enough time to finish all the homework he's assigned,and his roommate tells him to quiet down because the first of the three movies they've planned to watch that day has begun.Stan's behavior demonstrates which economic concept?

A) rational behavior
B) time inconsistency
C) chronologically challenged behavior
D) time allocation

Question 14

Behavioral economists recommend mechanisms that help people:

A) find the lowest cost for items that maximize their utility.
B) stick with choices they say they want to make, but often don't.
C) enact utility-maximizing decisions based on complete information.
D) Behavioral economists have not developed tools that help people with any of these.

Question 15

An application of behavioral economics is:

A) price inconsistency.
B) rational cost-price decision making.
C) forgetting the fungibility of money.
D) All of these are applications of behavioral economics.

Question 16

An application of behavioral economics is:

A) time inconsistency.
B) thinking irrationally about costs.
C) forgetting the fungibility of money.
D) All of these are applications of behavioral economics.

Question 17

Economists make the general assumption that:

A) people are rational, but their behavior doesn't always follow this assumption.
B) people are irrational, but there are some correlations in behavior that have been proven.
C) people are rational, but this doesn't really ever resemble reality.
D) people are irrational, but this is too difficult to put into a model.

Question 18

The field of economics that draws on insights from psychology to expand models of individual decision making is called:

A) psychological economics.
B) behavioral economics.
C) emotional economics.
D) decision optimization economics.

Question 19

Scott and Tom have dinner together at a new restaurant,and they discover that the portions are huge but taking home leftovers is not allowed.When both decide they are full,Scott forces himself to finish the rest of the food on his plate even though he doesn't really want to,while Tom asks the waiter to remove his plate while it still contains some food.How would an economist describe this behavior?

A) Scott acted rationally, because the food otherwise would have been thrown away.
B) Tom acted rationally, maximizing his utility.
C) Both Tom and Scott acted rationally.
D) Both Tom and Scott acted irrationally.

Question 20

Sitting through a terrible movie till the end because you already bought the ticket is an example of:

A) sunk cost fallacy
B) making a decision at the margin.
C) rational behavior.
D) negative utility endorsement.

Question 21

Behavioral economics uses concepts and theories to explain the systematic patterns in how we behave that lead to consistently erroneous decisions.These patterns are called:

A) cognitive dissonance in the field of psychology.
B) disruptive biases in the field of anthropology.
C) receptive biases in the field of anthropology.
D) cognitive biases in the field of psychology.

Question 22

Steve is finding it impossible to get over his most recent break-up and finds himself talking about her constantly.An example of a commitment device that Steve could use to get over her would be:

A) to allow Steve's best friend to punch him in the arm any time he mentions her name.
B) to take a cold shower every morning.
C) to start dating someone else.
D) None of these is a commitment device.

Question 23

An example of a commitment device for Jane,who says she really wants to save more would be:

A) an agreement that she give any new clothes, jewelry, or makeup purchases to her best friend, and Jane is not allowed to borrow them.
B) a commitment to only buy things on sale.
C) a decision to cook her own food and not order take-out or delivery food unless she is too busy.
D) buying a piggy bank to store savings.

Question 24

The idea of time inconsistency explains procrastination by:

A) recognizing that we have several modes of decision making, and the less time we have to react, the worse the decision is.
B) recognizing that our ability to remember long-term benefits when making decisions diminishes the closer the action becomes.
C) recognizing that we have two modes of decision making, a "future-oriented" and a "present-oriented" self, who have conflicting objectives.
D) recognizing that we never take long-term benefits into account.

Question 25

Not buying junk food while doing the weekly shopping and forcing an extra trip to the store to acquire it is an example of:

A) increasing the cost of a vice.
B) a commitment device.
C) how people compensate for time-inconsistent decisions.
D) All of these are true.

Question 26

Installing software to limit screen time,forcing you to uninstall it every time you reach the limit,is an example of:

A) increasing the cost of a vice.
B) a commitment device.
C) can be explained through behavioral economics.
D) All of these are true.

Question 27

Rick finds a great Internet deal on an all-inclusive vacation rental in the Tropics for $1200,and immediately places a $1000 nonrefundable deposit on it.He later learns that the dates he planned to go are right in the middle of hurricane season,and it is likely to be miserable and potentially dangerous weather the entire time.Rick decides he cannot waste the $1000 and takes the trip anyway.While sitting in the rain,miserable,Rick realizes he should have:

A) ignored his sunk cost of $1200 and skipped the trip.
B) ignored his sunk cost of $1000, and skipped the trip.
C) hired a lawyer for $1000 to go to court and try to get his deposit back.
D) hired a lawyer for $1000 to sue the travel agency.

Question 28

Deciding not to buy any junk food at the grocery store while shopping for the week is:

A) an example of removing temptation in an effort to match present-oriented decisions more closely to future-oriented ones.
B) an example of how individuals may compensate for the time inconsistency of their actions.
C) an example of a tool people can use in order to enact the actions they say they want to make, but have a hard time making.
D) All of these are true.

Question 29

A commitment device is:

A) an arrangement entered into by an individual with the aim of helping fulfill a plan for future behavior that would otherwise be difficult.
B) a way to deal with time inconsistency.
C) something that helps people conquer their vices.
D) All of these are true.

Question 30

Jake brings his Xbox home over winter break and leaves it there,thinking he will study more in the spring without it around.Jake is:

A) trying to compensate for the time-inconsistency of his desire to study more, but temptation to play video games instead.
B) forcing his behavior to match economic theory.
C) not acting rationally, since what he really wants is to play games all day.
D) demonstrating that he has forgotten the fungibility of money.

Question 31

Evan knows his GPA would skyrocket if he could break his horrible habit of procrastinating.An example of a commitment device Evan could use would be:

A) to allow himself one hour of leisure for every half-hour of studying he does each day.
B) to exercise before studying in order to be refreshed.
C) to pay a student to meet him each afternoon for 2 hours in the library to ensure he studies every day.
D) All of these are commitment devices.

Question 32

Beth really wants to get in shape,but just can't seem to ever get herself to the gym.An example of a commitment device Beth could use would be:

A) to spend time before going to the gym doing something she really enjoys doing, like seeing a movie.
B) to allow herself one dessert for each visit to the gym.
C) to make arrangements to meet with an exercise buddy every day at the gym to work out together.
D) None of these is a commitment device.

Question 33

An example of a sunk cost would be:

A) the price of a lift ticket you bought and used to ski the whole day.
B) the price of a lift ticket you bought and used for 1 run before you fell and broke your ankle.
C) the nonrefundable deposit you put on your vacation rental.
D) All of these are examples of sunk costs.

Question 34

Sunk costs are:

A) costs that have been incurred and cannot be recovered.
B) explicit costs that will incur large implicit costs to recoup or recover.
C) costs that are upfront on a project and can be pulled out if the business goes under.
D) the cost of recovering lost expenditures.

Question 35

The idea of time inconsistency:

A) explains how it can be rational for someone to say he's going to eat a salad for dinner each night this week and end up eating pizza four out of five nights instead.
B) explains how it can be rational for someone to pay more for something on his credit card than if he were to pay cash for the same thing.
C) explains why people refuse to ignore only some sunk costs.
D) Time inconsistency doesn't explain any of these behaviors.

Question 36

Brett desperately wants to quit smoking,but just can't seem to do it on his own.So,he tells his friends that he will pay them $20 each time they catch him smoking.This agreement with Brett's friends is an example of:

A) an irrational choice
B) an opportunistic device
C) a commitment device.
D) an irrational device.

Question 37

Applying the idea of time inconsistency,we can say that,in general,a person's "future-oriented self":

A) has the same objectives as the person's present-oriented self, but articulates them differently.
B) tends to choose healthier options, whereas the present-oriented self gives into temptation more easily.
C) is less rational in decision-making, because that self rarely matches actual behavior.
D) is more rational in decision-making, because its choices are generally healthier or more altruistic.

Question 38

In an effort to lose weight,Sam posts flyers all over town that offer a reward of $50 to anyone who catches him eating unhealthy food.Sam's flyers are an example of:

A) a commitment device.
B) price-optimization theory.
C) the law of supply.
D) a way to deal with inconsistent costs.

Question 39

An example of a commitment device would be:

A) buying yourself an ice cream after going to the gym.
B) putting a note on the cookie jar that you want to lose weight.
C) a swear jar that you and your friends agree must be paid $5 each time someone swears.
D) All of these are examples of commitment devices.

Question 40

An example of a sunk cost would be:

A) the cost of a movie ticket once you've started watching the movie.
B) the value of a lift ticket once you've started skiing.
C) the admission fee you paid to enter a national park.
D) All of these are examples of sunk costs.

Question 41

In economics,we observe that people consistently make irrational decisions in certain situations and choose to do something even if:

A) the benefits outweigh the opportunity costs.
B) the opportunity costs outweigh the benefits.
C) the benefits outweigh the sunk costs.
D) the sunk costs outweigh the opportunity costs.

Question 42

Walter rents some ice time at the local hockey rink for 2 hours.After skating for an hour,he finds himself cold,tired,and hungry.If Walter decides to skate around for the other hour before leaving,it is likely because he:

A) is ignoring the sunk cost of the rink time.
B) is focusing on the sunk cost of the rink time.
C) is weighing his opportunity costs of the second hour against the benefits of the second hour of skating.
D) None of these is true.

Question 43

Undervaluing of opportunity cost sometimes occurs because:

A) the opportunity cost is easy to visualize.
B) the benefit is difficult to visualize.
C) the opportunity cost is hard to visualize.
D) opportunity cost is just theoretical.

Question 44

Marissa walks into a convenience store to buy something to drink.As she stares into the cooler,her opportunity cost of choosing a Gatorade is:

A) obvious. It's the value she places on whatever drink she would choose if she didn't pick Gatorade.
B) distant and abstract. It's the value she places on whatever drink she would choose if she didn't pick Gatorade.
C) obvious. It's the value she places on all the other drinks she could choose instead of Gatorade.
D) distant and abstract. It's the value she places on all the other drinks she could choose instead of Gatorade.

Question 45

Patti buys a new kind of cereal to try even though it's more expensive than her favorite kind.After a single bowl,Patti decides she does not care for the new cereal at all,and she:

A) forces herself to finish it, because she irrationally focuses on the sunk cost of the cereal.
B) throws it away, because she irrationally spent money on something she had no information about.
C) forces herself to finish it, because she rationally computes the cost per bowl.
D) None of these is likely to happen for the reason stated.

Question 46

Jason spends all afternoon baking a cake.When it comes out of the oven,it's burnt and sunken in the middle,and Jason considers whether he should throw it away or not.If Jason were rational,he would compare the ______________,which is ______________,to the benefits of eating a burnt,sunken cake.

A) sunk cost; the time and ingredients spent making the cake
B) opportunity cost; the value of the time spent and utility from eating or doing something else
C) total cost; the value of the time spent making the cake, the cost of ingredients, and value of the time that could be spent doing something other than eating the cake
D) benefit of throwing the cake away; the value of not having to eat burnt cake

Question 47

Jason spends all afternoon baking a cake.When it comes out of the oven,it's burnt and sunk in the middle.Jason thinks about all the time he invested in making it and decides he'll spend more time frosting it and eat it anyway,even though it tastes pretty terrible.Jason's decision to continue to decorate and eat the cake is a good example of:

A) someone focusing on sunk costs.
B) someone ignoring sunk costs.
C) someone thinking marginally.
D) someone weighing the opportunity costs of frosting and eating the cake and the benefits of doing so.

Question 48

Sandy is a big Star Wars fan and buys a $20 ticket a week in advance to the premier of the new movie.After arriving at the theater,she realizes she left the ticket at home and doesn't have time to return home and get it.Sandy can buy another ticket for $20.She decides not to because seeing the movie isn't worth $40 to her.This is an example of:

A) rational behavior because she values the movie less than $40
B) irrational behavior because she really values the movie more than $40
C) irrational behavior because the initial $20 is a sunk cost.
D) rational behavior because it is a commitment device to never forget a ticket at home again.

Question 49

In economics,we assume rational decisions are made when individuals weigh:

A) the sunk costs versus the benefits of an action.
B) the sunk costs versus the opportunity costs of an action.
C) the opportunity costs versus the benefits of an action.
D) the opportunity and sunk costs versus the benefits of an action.

Question 50

In economics,we assume a rational person will choose to do an activity:

A) if the opportunity costs outweigh the benefits of doing so.
B) if the sunk costs outweigh the benefits of doing so.
C) if the sunk and opportunity costs combined outweigh the benefits of doing so.
D) if the opportunity costs do not outweigh the benefits of doing so.

Question 51

In economics,choosing one activity means:

A) choosing not to take advantage of another opportunity.
B) people always act rationally.
C) people signal they only like that activity.
D) that activity must be observable to be studied.

Question 52

Rick finds a great Internet deal on an all-inclusive vacation rental in the Tropics for $1200,and immediately places a $1000 nonrefundable deposit on it.He later learns that the dates he planned to go are right in the middle of hurricane season,and it is likely to be miserable and potentially dangerous weather the entire time.Rick decides he cannot waste the $1000 and takes the trip anyway.While sitting in the rain,miserable,Rick realizes:

A) he fell victim to the sunk-cost fallacy and should have ignored the fact that the $1000 was gone.
B) he fell victim to the implicit-cost fallacy and should have ignored the fact that the $1000 was gone.
C) he fell victim to the fungibility-fallacy and should not have gone on the trip.
D) going on the trip was a utility-minimizing experience.

Question 53

After enjoying a perfectly delicious meal,Duane treats himself and orders a very expensive dessert.After one bite,Duane realizes he does not care for it at all.He chokes it down while thinking about the money he just wasted on it.Duane's decision to eat the entire dessert is an example of:

A) irrational behavior.
B) a cognitive bias, because he is focused on the money spent on the dessert.
C) emphasizing a sunk cost instead of weighing marginal costs and benefits.
D) Duane's behavior exemplifies all of these.

Question 54

Economists believe:

A) every choice has a sunk cost.
B) only some choices have an opportunity cost.
C) every choice has an opportunity cost.
D) sunk costs are a figment of most people's imagination.

Question 55

When shopping for a ticket to see One Direction,her favorite band,in concert,Annie mistakenly purchased a non-refundable ticket to the off-off-off Broadway play "One Dissection," which she has no interest in seeing.Because the ticket cost her $100,Annie decides to think about it:

A) rationally and skips the play and spends another $100 on the concert ticket.
B) rationally and sits through the play she has the ticket for, which is as awful as she thought it might be.
C) irrationally and skips the play and spends another $100 on the concert ticket.
D) None of these is a possible outcome.

Question 56

Bill attends a local basketball game.The teams are very unbalanced,the play is bad,and the score quickly reaches 36-2.At halftime,Bill realizes he's having no fun,leaves the game,and goes home.Bill's behavior is NOT determined by

A) economic logic.
B) sunk costs.
C) utility maximization.
D) None of these is true.

Question 57

People will consistently sit through terrible movies at the theater instead of leaving early.This behavior makes no sense because it implies people are:

A) ignoring sunk costs, which is irrational.
B) focusing on sunk costs, instead of thinking at the margin.
C) thinking at the margin, instead of focusing on sunk costs.
D) not thinking at the margin, which is rational.

Question 58

Beverly spends $100 on a teeth whitening kit.After one application,her gums are inflamed and it feels like her mouth is on fire.Beverly is trying to decide whether to apply the treatment again,or throw the kit away.The opportunity cost of a second application is:

A) $100.
B) the pain and suffering involved with the second application.
C) $100 + the pain and suffering involved with the second application.
D) $100 + the pain and suffering involved with the first and second application.

Question 59

People consistently consider sunk costs when weighing the trade-offs involved in a decision because:

A) they are rational.
B) they are utility-maximizers.
C) they think at the margin.
D) they find it hard to accept their losses.

Question 60

An example of someone who irrationally considers sunk costs when making a decision is most likely:

A) a family that pays $20 to enter a state park for the day and leaves after an hour.
B) a family that pays $20 to enter a state park for the day and stays all day.
C) someone who paid $50 for a ticket to a baseball game and ends up sitting through the entire game in the freezing rain without a jacket.
D) someone who paid $50 for a ticket to a baseball game and ends up sitting through the entire game enjoying himself.

Question 61

Christopher just won tickets to see an NFL football game.His coworker offers to pay him $300 for them,but Christopher decides to use them,even though he would never pay $300 for them himself.Christopher's willingness to consume $300 worth of tickets that he doesn't value at $300 is attributed to:

A) the high transactions costs involved in selling the tickets.
B) the implicit cost of ownership.
C) his refusal to ignore the sunk cost of the tickets.
D) None of these is correct.

Question 62

A consumer is likely to _____________ his opportunity costs when ____________.

A) undervalue; they are not right in front of him
B) undervalue; they are obvious
C) overvalue; they are not obvious
D) overvalue; they are right in front of him

Question 63

Economists believe that people who sit through bad music concerts likely do so because:

A) they do not ignore the sunk cost involved.
B) they undervalue the opportunity cost of their time.
C) they don't accurately consider what else they could be doing with their time.
D) All of these are true.

Question 64

The implicit cost of ownership:

A) is a cognitive bias.
B) is an unproven concept.
C) is the monetary opportunity cost that is often overlooked.
D) All of these are true.

Question 65

Grace just got her first cell phone,an iPhone,for graduation.She tosses her iTouch in a drawer and never touches it again,even though she could easily sell it for $75 on Craigslist.Grace's choice is ___________ because ________________.

A) rational; she weighs the $200 she paid for the iTouch and the $75 she could sell it for now
B) irrational; she weighs the $200 she paid for the iTouch and the $75 she could sell it for now
C) rational; she would not pay $75 to buy the iTouch today
D) irrational; she would not pay $75 to buy the iTouch today

Question 66

Economists believe that people who force themselves to always eat everything on their plate at a restaurant,regardless of how full they might feel,likely do so because:

A) they gain negative utility from insulting the chef.
B) they overvalue the opportunity costs of their health and time involved with eating food they don't really want.
C) they include the sunk cost of their meals in making their decision.
D) they undervalue the true benefit of eating too much.

Question 67

Jim bought a new bike and rides it every day,while his old one sits in the garage untouched.Jim’s opportunity cost of keeping the old bike is:

A) nothing, since he doesn't really value it anymore.
B) whatever he could sell it for.
C) whatever he would be willing to sell it for.
D) All of these are true.

Question 68

Paul wins a $500 watch in a sweepstakes and decides to keep it,even though he says he would have preferred to win $500 cash.Knowing Paul's preferences,how can we explain his decision to keep it?

A) Paul has a cognitive bias, and it leads him to value the watch more because he owns it.
B) Paul has a cognitive bias; he is ignoring a nonmonetary opportunity cost of already owning the watch.
C) Paul's implicit cost of ownership makes him feel as though he should keep the watch.
D) All of these are true.

Question 69

Claire bought a new TV,and the old one sits in her basement untouched.If Claire were rational,what would she do with the old TV?

A) Throw it away because she doesn't really value it anymore.
B) Sell it for its market value, because that is the opportunity cost of having it sit in her basement.
C) Give it away, because it is worth more to someone else than Claire.
D) Either sell it for the value of her new TV or keep it.

Question 70

Carlos has been invited to go skiing for the afternoon with his friends.It will cost $40 for a lift ticket.It is likely Carlos will:

A) overvalue the benefit of skiing.
B) undervalue the opportunity cost of his afternoon.
C) find it difficult to place a value on what he might do instead of skiing.
D) All of these are true.

Question 71

The implicit cost of ownership:

A) is a cognitive bias if it goes ignored.
B) leads people to value things more once they possess them.
C) is a nonmonetary opportunity cost that is often overlooked.
D) All of these are true.

Question 72

Kyle receives two free passes to the symphony as a bonus at work.He has never been to the symphony before and would probably not buy such tickets for their face value of $120.Kyle decides to use the tickets rather than sell them at face value.This type of behavior is:

A) irrational, since Kyle would not pay $120 for the tickets, yet gives up $120 by not selling them.
B) rational, since Kyle can check out the symphony and not have to pay for it himself.
C) irrational, since Kyle ignores his sunk cost of $120.
D) rational, since Kyle does not ignore his sunk cost of $120.

Question 73

Behavioral economists think that the less obvious a person's opportunity cost is:

A) the harder it is to value accurately.
B) the more likely they will undervalue it.
C) the less likely they are to correctly value it.
D) All of these are true.

Question 74

Howie just bought a new digital camera to replace his old one.His old one works perfectly fine and would sell on Craigslist for $100.The fact that Howie would not pay $100 for it,yet continues to let it sit in his closet unused is explained by:

A) the implicit cost of ownership.
B) the explicit cost of ownership.
C) the explicit cost of sales.
D) ignoring sunk costs.

Question 75

Keith just got an iPhone 5 for his birthday,and he quickly switches his data over and throws his iPhone 4 in a drawer and forgets about it.Economists would say this behavior is ___________ and would use the concept of ________________ to explain this choice.

A) rational; the implicit cost of ownership
B) irrational; the implicit cost of ownership
C) irrational; ignoring sunk costs
D) rational; considering sunk costs

Question 76

People are especially prone to undervaluing opportunity costs when

A) they are nonmonetary, such as time.
B) they involve obvious costs, like lost wages.
C) All of these are true.
D) they are monetary.

Question 77

Dale just won tickets to see a NASCAR race.His coworker offers to pay him $200 for them,but Dale decides to use them,even though he would not pay $200 for them himself.Dale's willingness to consume $200 worth of tickets that he doesn't value at $200 is attributed to:

A) the explicit cost of ownership.
B) the high fungibility of money.
C) his refusal to ignore the sunk cost of the tickets.
D) None of these is correct.

Question 78

Sadie just bought a new karaoke machine to replace her old one.Her old one works perfectly fine and would sell on Craigslist for $50.The fact that Sadie would not pay $50 for it,yet continues to let it sit in her closet unused is explained by:

A) the implicit cost of ownership.
B) the cost of admitting she likes karaoke.
C) ignored sunk costs.
D) irrationally considering sunk costs.

Question 79

Carla is deciding whether to go to the movies this afternoon.Behavioral economists predict Carla likely will:

A) have a difficult time accurately valuing the benefit of the movie.
B) have a hard time accurately valuing her opportunity cost of the movie.
C) over-value her opportunity cost.
D) All of these are true.

Question 80

Kate receives two free passes to the waterpark for her birthday.She's not a huge fan of waterparks,and,therefore,would not buy such tickets for their face value of $90.Kate decides to use the tickets.This type of behavior is explained with the concept of:

A) the implicit cost of ownership.
B) the fungibility of money.
C) ignoring sunk costs.
D) None of these.