Question 1

The Kahneman-Tversky value function shows that a gain of $100

Accepted Answer

A) Is valued less than two gains of $50 
B) Would be offset in one's mind by a loss of less than $100 
C) Would be offset in one's mind by a loss of more than $100 
D) Would be offset by a gain of $100

Question 2

Suppose you have tickets to tonight's concert.Nevertheless, you are also in bed with a very high fever.In considering weather to go to the concert or not, a rational consumer should:

Accepted Answer

A) Go to the concert if the price you paid for the tickets is very high 
B) Stay in bed if the price of the tickets is very low 
C) Go to the concert if the value of the concert for you offset the discomfort of getting out of bed 
D) stay in bed if the fever is the discomfort of getting out of bed is too high

Question 3

According to the textbook, an efficient manager will be one who:

Accepted Answer

A) Does not have the tendency to put too much weight on recent performance 
B) Has the tendency to put too much weight on recent performance 
C) Who never considers recent performance 
D) Only considers recent performance.

Question 4

The Kahneman-Tversky value function is

Accepted Answer

A) A conventional utility function 
B) Much steeper in losses than in gains 
C) Much steeper in gains than in losses 
D) Mot defined over changes in wealth

Question 5

Bounded rationality effects people in more ways than simply expenditure patterns.Think of ways in which your behavior is bounded so that it appears irrational at times.Be careful not to lump together concepts that are discussed in Chapter 8 under other names.Is bounded rationality a good or bad thing in your view?

Accepted Answer

The answer of Bounded rationality effects people in more ways...

Question 6

It has be said that people would never build a house if they had to go to the lumberyard and buy the framing lumber and each building material by the piece.Where did such a notion come from? Might it be true?

Accepted Answer

The answer of It has be said that people would...

Question 7

A fundamental axiom of rational choice theory is

Accepted Answer

A) Choices should be independent of relevant alternatives 
B) Choices should be independent of irrelevant alternatives 
C) Consumers should be risk-neutral 
D) Consumers should disregard recent performance data

Question 8

Kahneman and Tversky have found that

Accepted Answer

A) People tend to weigh each event separately 
B) People tend to treat gains and losses symmetrically 
C) People attach more importance to the gain than to the loss 
D) People tend to act rationally

Question 9

The Kahneman-Tversky value function provides a rationale for

Accepted Answer

A) Putting several Christmas gifts in one big box for your special friend 
B) Paying cash rather than using a credit card 
C) Requiring employees to take all their vacation days in two weeks rather than taking scattered days throughout the year 
D) Car dealers offering rebates rather than a price reduction on a car

Question 10

Weber and Fecher found

Accepted Answer

A) That it is easier to tell the difference between a 25 and a 50-watt light bulb than it is to tell the difference between a 100-watt bulb and a 300-watt bulb 
B) That the minimally perceptible difference is roughly proportional to the original intensity of the stimulus 
C) That the minimally perceptible difference is inversely proportional to the original intensity of the stimulus 
D) Consumers are more likely to drive 10 blocks to save $5 on a $500 television than they are to drive 10 blocks to save $5 on a $25 clock

Question 11

If Kahneman and Tversky are correct, I should

Accepted Answer

A) Buy individual stocks rather than put my money into a mutual fund 
B) Put my money in a mutual fund instead of individual stocks 
C) Be indifferent which type of investment I make 
D) Have opposite strategies depending on whether my investments will rise or fall

Exam 8: Cognitive Limitations and Consumer Behavior