Questions & Answers
Browse all 20 questions from the
Fundamentals of Behavioural Economics study set below.
Each question shows the correct answer — select a study format above to practice interactively.
1
What term describes the tendency to rely too heavily on the first piece of information offered when making decisions?
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A
Anchoring bias
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B
Confirmation bias
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C
Availability heuristic
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D
Hindsight bias
2
In prospect theory, what concept explains why the pain of losing is psychologically about twice as powerful as the joy of gaining?
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A
Loss aversion
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B
Sunk cost fallacy
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C
Framing effect
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D
Endowment effect
3
What is the phenomenon where individuals value an object more simply because they own it?
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A
The endowment effect
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B
The halo effect
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C
The paradox of choice
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D
Social proof
4
What concept suggests that people are more likely to choose an option if it is presented as the 'default' choice?
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A
The default effect
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B
The scarcity principle
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C
The reciprocity norm
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D
The peak-end rule
5
Which bias involves the tendency to search for, interpret, and recall information in a way that supports one's pre-existing beliefs?
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A
Confirmation bias
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B
Self-serving bias
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C
Dunning-Kruger effect
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D
Fundamental attribution error
6
What is the name of the cognitive bias where people overestimate the importance of information that comes to mind quickly?
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A
Availability heuristic
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B
Representativeness heuristic
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C
Affect heuristic
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D
Base rate fallacy
7
Which term refers to the human tendency to focus on the immediate rewards of a decision rather than long-term consequences?
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A
Present bias
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B
Projection bias
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C
Optimism bias
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D
Planning fallacy
8
The 'sunk cost fallacy' refers to the tendency to continue an endeavor once an investment in money, effort, or time has been made, even if:
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A
The current costs outweigh the benefits
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B
The outcome is guaranteed
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C
The person is happy with the progress
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D
The decision was made by a group
9
What theory, developed by Daniel Kahneman and Amos Tversky, describes how people choose between probabilistic alternatives that involve risk?
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A
Prospect theory
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B
Game theory
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C
Utility theory
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D
Efficient market hypothesis
10
Which term describes the tendency to underestimate the time required to complete a future task?
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A
Planning fallacy
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B
Negativity bias
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C
Outcome bias
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D
Survivorship bias
11
What describes the tendency for people to assume that their own current preferences will remain the same in the future?
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A
Projection bias
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B
Empathy gap
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C
Bandwagon effect
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D
Contrast effect
12
Which social phenomenon occurs when individuals conform to the actions of others, assuming those actions are correct?
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A
Social proof
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B
Authority bias
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C
In-group bias
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D
False consensus effect
13
What is the 'framing effect' in decision-making?
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A
Drawing different conclusions based on how information is presented
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B
Preferring the first option presented
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C
Ignoring information that contradicts a belief
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D
Overestimating the likelihood of rare events
14
The 'Dunning-Kruger effect' is a cognitive bias where people with low ability at a task:
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A
Overestimate their competence
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B
Underestimate their competence
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C
Accurately assess their competence
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D
Refuse to perform the task
15
Which concept describes the mental shortcut that helps people make decisions by comparing a situation to a known prototype?
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A
Representativeness heuristic
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B
Anchoring
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C
Framing
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D
Priming
16
What is the term for the influence of the order of presentation on memory or judgment?
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A
Serial position effect
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B
Bystander effect
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C
Placebo effect
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D
Observer effect
17
The 'halo effect' is a bias where:
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A
A positive impression of a person in one area influences opinion in another
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B
People follow the majority regardless of their own beliefs
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C
The last information received is remembered best
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D
People focus only on negative information
18
What is the term for the tendency to believe that random events are influenced by previous outcomes, even when they are independent?
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A
Gambler's fallacy
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B
Illusion of control
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C
Clustering illusion
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D
Base rate neglect
19
'Bounded rationality' suggests that human decision-making is limited by:
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A
Information, cognitive capacity, and time
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B
Unlimited access to data
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C
Perfect emotional stability
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D
External market pressures only
20
Which bias describes the tendency to interpret past events as having been more predictable than they actually were?
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A
Hindsight bias
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B
Recall bias
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C
Focusing illusion
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D
Misattribution
