Questions & Answers
Browse all 18 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
Which field of study combines psychology and economics to explain why people do not always make rational financial decisions?
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A
Behavioural Economics
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B
Macroeconomics
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C
Classical Physics
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D
Game Theory
2
What is the term for the tendency of people to overvalue an item simply because they own it?
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A
The Endowment Effect
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B
Anchoring Bias
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C
Loss Aversion
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D
Confirmation Bias
3
Who is often referred to as the 'father of behavioural economics' and won a Nobel Prize for his work on prospect theory?
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A
Daniel Kahneman
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B
Adam Smith
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C
John Maynard Keynes
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D
Milton Friedman
4
What does the concept of 'Loss Aversion' state about human psychology?
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A
People feel the pain of a loss more intensely than the joy of an equivalent gain
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B
People prefer losing small amounts to gaining large amounts
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C
People avoid making any financial decisions at all
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D
People only care about long-term savings
5
Which bias refers to 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
Availability Heuristic
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C
Hindsight Bias
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D
Bandwagon Effect
6
In behavioural economics, what is a 'nudge'?
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A
A subtle change in how choices are presented to influence behaviour
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B
A forced legal requirement to save money
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C
A government tax on unhealthy snacks
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D
A direct bribe to encourage spending
7
The 'Bandwagon Effect' describes a phenomenon where:
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A
People do something primarily because others are doing it
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B
People ignore the majority opinion
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C
People make decisions based on historical data
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D
People choose the cheapest option available
8
What is 'Mental Accounting' in the context of consumer behaviour?
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A
The tendency to treat money differently depending on where it came from
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B
The process of calculating compound interest
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C
The habit of keeping a strict paper budget
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D
The act of saving money in a bank account
9
Which bias explains why people think events are more likely to happen if they can easily recall similar examples from memory?
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A
Availability Heuristic
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B
Sunk Cost Fallacy
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C
Framing Effect
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D
Optimism Bias
10
What is the 'Sunk Cost Fallacy'?
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A
Continuing an endeavour because of past investment, even if it is no longer beneficial
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B
Only spending money that has been earned recently
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C
Assuming that costs will always rise over time
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D
The fear of losing money in the stock market
11
The 'Framing Effect' suggests that people's choices are influenced by:
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A
How information is presented to them
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B
The total cost of the item
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C
The colour of the advertisement
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D
The brand name of the product
12
What is 'Hyperbolic Discounting' in behavioural economics?
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A
Valuing immediate rewards much more highly than future rewards
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B
The process of discounting goods in a supermarket
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C
Buying items only when they are on sale
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D
Predicting future inflation rates
13
Which concept describes the difficulty people have in making a choice when presented with too many options?
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A
Choice Overload
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B
Decision Fatigue
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C
Information Symmetry
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D
Opportunity Cost
14
What is the 'Confirmation Bias' in economic decision-making?
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A
Searching for information that supports one's existing beliefs
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B
Changing one's mind based on new evidence
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C
Asking a bank for financial advice
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D
Comparing prices between two different shops
15
What is 'Present Bias'?
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A
Prioritizing current satisfaction over future benefits
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B
The habit of buying gifts for others
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C
The tendency to save money for retirement
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D
Investing only in local businesses
16
What does 'Bounded Rationality' suggest about human decision-making?
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A
Humans have limited time and information to make perfectly rational choices
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B
Humans are always perfectly rational actors
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C
Humans only make decisions based on emotion
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D
Humans are incapable of mathematical reasoning
17
The 'Default Effect' occurs when:
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A
People stick to the pre-set option because it requires less effort
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B
People always choose the most expensive option
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C
People refuse to make any choice at all
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D
People choose based on random selection
18
What is the main goal of using 'Nudge Theory' in public policy?
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A
To encourage better choices without restricting individual freedom
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B
To ban unhealthy products entirely
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C
To increase taxes on all goods
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D
To force citizens to invest in the stock market
