57. The \"anchoring\" phenomenon observed by behavioral economists refers to the

Question

57. The "anchoring" phenomenon observed by behavioral economists refers to the fact that people's estimates of the value of things are affected by A. Recently considered information B. Their childhood memories C. Irelevant data always D. Relevant information solely 58. One implication of the phenomenon described by economist Richard Easterlin as the "hedonic treadmill" is that: A. People who consume more goods and services are happier than those who consume less B. People can only become happier if they are consuming more and more C. There is a threshold of consumption that one must cross before one can be happy D. We can compare the happiness of different individuals 59. The utility of a good or service: A. is synonymous with usefulness. B. is the satisfaction or pleasure one gets from consuming it. C. is easy to quantify. D. rarely varies from person to person. 60. Prospect theory is based in part on the idea that most individuals are: A. loss averse. B. irrationally motivated. C. risk neutral. D. all of the above. 61. According to behavioral economics: A. gains are felt more intensely than losses. B. each successive unit of loss is equal in its marginal disutility. C. each successive unit of loss hurts, but less than the previous unit. D. each successive unit of loss hurts, and more than the previous unit. 62. According to the concept of framing effects: A. advertising power is limited because of the inability of firms to change perspectives. B. people will assign the same utility to a given situation, regardless of their previous status quo. C. whether a new situation is viewed as a gain or a loss depends on one's starting position. D. firms should never raise prices or reduce wages.

Explanation / Answer

57. A

Anchor is a mental reference point, which could be a recent information, which we use to base our decision upon.

58 B. Hedonic treadmill says that happiness is relative and to be on the same level of happiness we need more and more income.

59. B. Utility is the satisfaction we get from consuming a good or service.

60. A. Most individuals are averse to losing and less concerned with gain, according to prospect theory.

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