You see an advertisement promoting a sale “for a limited time only!” with a countdown clock. Which bias is being used?
Fear of Missing Out (FOMO)
Behavioral economics is …
The study of how rational people make economic decisions
The study of how irrational factors affect individual’s economic decisions
The study of how economies around the world interact with each other
The study of how investors choose which stocks to buy and sell
Guy bought tickets to a concert but there is a bad snow storm. He decides to go anyway because he paid for it. This is
Sunk Cost Fallacy
Ally signs up for a Netflix trial. Because she “owns” a full account, she places high value on it and signs up. This is
The Endowment Effect
Peter can choose from two retirement accounts. Fearing a loss, he opts for the more conservative one. This is a type of
Paula sees her friends' pictures of a concert that she couldn't attend because of work. She feels like an outsider.
Paula is experiencing Fear of Missing Out (FOMO)
Paula is experiencing Herd Mentality
Paula is experiencing Loss Aversion
Paula is experiencing Confirmation Bias
Which of the following is an example of loss aversion?
Selling your house at a loss to find a better investment opportunity
Believing that your house is worth more than it is because you own it
Deciding against selling your house below what you purchased it for
Only looking at sources that reinforce a higher selling value for your home
Confirmation bias is …
The tendency to seek out information that supports our existing beliefs
The tendency to value something more because you own it
The belief that we are better at something than we actually are
The belief that we should do something because our friends are doing it
People who win the lottery tend to return to their original levels of happiness after the novelty of winning wears off.
This is an example of the Endowment Effect
This is an example of Confirmation Bias
This is an example of Hedonic Adaptation
This is an example of Herd Mentality
The Fear of Missing Out, or FOMO, is…
The effect of feeling a loss more than an equal gain
The anxiety that an interesting or exciting event is happening without you
Placing higher value on things you own
The opposite of YOLO (You Only Live Once)
The Endowment Effect is …
Doing something because you see all of your friends doing it
Valuing something more because you own it
Returning to a baseline level of happiness after a major event
Continuing something because you have contributed resources to it
The irrational ways that we process information & make decisions using our own perspective and incomplete information.
You are new to a city and find two restaurants near each other that offer a similar menu. You pick the more crowded one.
This is an example of Fear of Missing Out (FOMO)
This is an example of Sunk Cost Fallacy
This is an example of Overvaluing
Marie's car has needed over $2000 in repairs. She resists selling it because she has spent so much money. This is...
While researching Apple, Remy tends to focus on positive stories about their profits instead of stories about poor sales
Remy is experiencing the Endowment Effect
Remy is experiencing Overconfidence Bias
Remy is experiencing Herd Mentality
Remy is experiencing Confirmation Bias
75% of drivers believe that they are above average. Which type of overconfidence is this an example of?
In 2021, many people saw the value of Gamestop stock increasing sharply and purchased the stock too. These buyers were
Experiencing Herd Mentality
Experiencing Confirmation Bias
Experiencing Hedonic Adaptation
Which of the following is an example of allowing sunk costs to impact your decision?
Not selling a baseball card that you think is worth more because you own it
Continuing to watch a movie that you don’t like because you paid to see it
Selling a stock because you see the price drop and want to avoid losses
Buying a new phone because you see all of your friends have that it
Max believes his sense of direction is excellent and refuses to ask for directions. Which overconfidence is he showing?
Overprecision is …
The exaggerated certainty that our beliefs are correct
The overvaluing of our own abilities relative to everyone else
The belief that we are above average without supporting evidence
The expectation that other people place upon us to be accurate all the time