PFin - Unit 1 Flashcard Review - Behavioral Economics (2024)

Front

You see an advertisement promoting a sale “for a limited time only!” with a countdown clock. Which bias is being used?

Back

Fear of Missing Out (FOMO)

Front

Behavioral economics is …

Back

The study of how irrational factors affect individual’s economic decisions

Front

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

Back

Sunk Cost Fallacy

Front

Peter can choose from two retirement accounts. Fearing a loss, he opts for the more conservative one. This is a type of

Back

Loss Aversion

Front

Paula sees her friends' pictures of a concert that she couldn't attend because of work. She feels like an outsider.

Back

Paula is experiencing Fear of Missing Out (FOMO)

Front

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

Back

Deciding against selling your house below what you purchased it for

Front

Which of the following is an example of the endowment effect?
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

Back

Believing that your house is worth more than it is because you own it

Front

Which of the following is an example of confirmation bias?
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

Back

Believing that your house is worth more than it is because you own it

Front

Confirmation bias is …

Back

The tendency to seek out information that supports our existing beliefs

Front

People who win the lottery tend to return to their original levels of happiness after the novelty of winning wears off.

Back

This is an example of Hedonic Adaptation