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

Question 1

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.

Answer 1

time inconsistency.

Question 2

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.

Answer 2

people are rational,but their behavior doesn't always follow this assumption.

Question 3

An interesting application of behavioral economics is:

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

Answer 3

All of these are interesting applications.

Question 4

Joe walks into Best Buy prepared to spend $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 5

Luke won tickets to see a One Direction 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 even more,and walks out.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.

Question 6

Procrastination can be seen as irrational behavior on the surface.One tool that behavioral economists have developed to account for this typical behavior is:

A)the time inconsistency of our decision-making.
B)the fungibility of money.
C)thinking inconsistently about prices.
D)None of these is a tool that has been developed by behavioral economists.

Question 7

An interesting 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 interesting applications.

Question 8

A behavior that is typically seen 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 9

Someone saying they want 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 10

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

Question 11

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)irrational behavior
C)chronologically challenged behavior
D)time allocation

Question 12

Behavioral economists have developed tools to help people actually do things they say they want to do but often don't,such as:

A)save more money.
B)donate more to charity.
C)live a healthier lifestyle.
D)All of these are things people say they want to do but often don't.

Question 13

Behavioral economists have developed tools that help people:

A)find the lowest cost for items that maximize their utility.
B)enact 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 14

Time inconsistency refers to a situation where:

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

Question 15

Mark has $2000 in savings.Over Christmas break,he puts over $500 on his credit card and pays it off gradually over the spring semester.An economist might observe that behavior as:

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

Question 16

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.

Question 17

Matt has $2000 saved up for Spring Break.Over Christmas break he decides to spend $400 of it on gifts instead of putting the gifts on his credit card and gradually replaces it in his Spring Break savings over the next few months.An economist would say this behavior is:

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

Question 18

Sitting through a terrible movie till the end is an example of:

A)recognizing sunk costs.
B)making a decision at the margin.
C)irrational behavior.
D)negative utility endorsement.

Question 19

Scott and Tom have dinner together.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 scrapes what's left on his plate into the garbage.How might an economist explain 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

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

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

Question 21

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 22

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 been more rational and:

A)ignored his sunk cost of $1000.
B)ignored his sunk cost of $1200.
C)considered his sunk cost of $1000.
D)considered his sunk cost of $200.

Question 23

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 one 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 24

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 25

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 26

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 pack her gym bag the night before and force herself to carry it with her all day.
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 27

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 28

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 remove the TV from his dorm room.
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 29

The idea of time inconsistency:

A)explains how it can be rational for someone to say they're 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 their credit card than if they were to pay cash for the same thing.
C)explains why people refuse to ignore only some sunk costs,while think at the margin other times.
D)Time inconsistency doesn't explain any of these behaviors.

Question 30

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.
D)All of these are examples of commitment devices.

Question 31

The idea of time inconsistency explains procrastination through:

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

Question 32

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)a way to increase the cost of his vice.
B)an incentive to help Brett quit,which is what he really wants to do.
C)a commitment device.
D)All of these are true.

Question 33

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)behavior that follows the law of demand.
C)can be explained through behavioral economics.
D)All of these are true.

Question 34

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 present-oriented self,just articulates it differently.
B)tends to choose healthier decisions,and 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 the choices are generally healthier or more altruistic.

Question 35

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 should be pulled out if the business fails to thrive.
D)None of these is correct.

Question 36

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

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

Question 37

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 38

An example of a sunk cost would be:

A)the value of a lift ticket you bought and used to ski the whole day.
B)the value 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 39

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)the law of demand.
C)how people compensate for time-inconsistent decisions.
D)All of these are true.

Question 40

An example of a commitment device would be:

A)putting your exercise bike in the middle of the living room in front of the TV.
B)putting a lock on the cookie jar.
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 41

Marissa walks into a convenience store to buy something to drink.As she stares into the cooler,the 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 42

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)considering sunk costs,instead of thinking at the margin.
C)thinking at the margin,instead of considering sunk costs.
D)not thinking at the margin,which is rational.

Question 43

Jason spends all afternoon baking a cake.When it comes out of the oven,it's burnt and sunk 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 44

When shopping for a ticket to see One Direction,her favorite band,in concert,Annie mistakenly purchased a 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 45

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 46

In economics,the concept of 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 47

In economics,we often observe that people consistently act irrationally in some situations and will 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 48

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

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

Question 49

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 considering 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 50

Economists believe:

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

Question 51

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 an example of:

A)ignoring sunk costs.
B)considering sunk costs.
C)rational decision making.
D)None of these is true.

Question 52

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 53

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

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

Question 54

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 55

Michelle is spending the day at the mall with friends.She sees a cute pair of shoes on sale for $40 and is considering her opportunity cost of buying them.She will likely:

A)have an easier time valuing the benefit of the shoes than the opportunity cost.
B)have an easier time valuing the opportunity cost of the shoes than their benefit.
C)not buy them since she can think of thousands of other ways to spend the $40.
D)buy them and lose surplus.

Question 56

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)considering a sunk cost instead of weighing marginal costs and benefits.
D)Duane's behavior exemplifies all of these.

Question 57

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

A)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.
B)a family that pays $20 to enter a state park for the day and leaves after an hour.
C)a family that pays $20 to enter a state park for the day and stays all day.
D)someone who paid $50 for a ticket to a baseball game and ends up sitting through the entire game enjoying himself.

Question 58

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 considers 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 prices out the cost per bowl.
D)None of these is likely to happen for the reason stated.

Question 59

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 considering 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 60

Carla is deciding whether to go to the movies this afternoon or not.Carla likely will:

A)have an easy time valuing the benefit of the movie.
B)have a difficult time valuing her opportunity cost of the movie.
C)undervalue her opportunity cost.
D)All of these are true.

Question 61

A consumer is likely to ______________ his benefit of making a choice when it is right in front of him and his opportunity cost is not.

A)undervalue
B)overvalue
C)accurately value
D)None of these is true.

Question 62

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

Question 63

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 of $100,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 64

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 65

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 you karaoke.
C)ignored sunk costs.
D)irrationally considering sunk costs.

Question 66

Behavioral economists think that the less obvious or concrete 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 67

People are especially prone to undervaluing opportunity costs when

A)they are nonmonetary,such as time.
B)they involve direct costs,like lost wages.
C)they are numerous and difficult to add up.
D)None of these is true.

Question 68

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

A)nothing,since he doesn't really value it anymore.
B)whatever he could sell it for.
C)the value of the space it takes up in his garage.
D)All of these are true.

Question 69

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 70

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 never 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 71

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

Question 72

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

Question 73

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 74

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 75

Carlo has been invited to go skiing for the afternoon with his friends.It will cost $40 for a lift ticket.It is likely Carlo 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 76

Kate receives two free passes to the waterpark for his birthday.She's not a huge fan of waterparks,and,therefore,would never 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.

Question 77

Kyle receives two free passes to the symphony as a bonus at work.He has never been to the symphony before,and,therefore,would never buy such tickets for their face value of $120.Kyle decides to use the tickets.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 opera 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 78

The implicit cost of ownership:

A)is a cognitive bias.
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 79

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 80

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