Unit 2.4

Which of the following influences individuals in decision making situations and takes them away from rational judgments?

•  Utility maximisation

• Biases

•  Utility maximisation

• Trying to negotiate the lowest price

Which of the following is an example of anchoring in terms of consumer behaviour?

• Consumers base the price they are willing to pay for a hamburger on the first price they see

• Where a consumer tries to negotiate the lowest price possible for a hamburger

• If the price of a hamburger falls the quantity demanded increases

• Where a higher price for a hamburger makes it more attractive to the consumer.

Which of the following is not an example of bounded rationality?

• Where an individual buys a brand of smartphone because everyone else has this brand

• Someone chooses a drink in a restaurant because they normally buy that drink

• A person chooses the first packet of biscuits they come to in a supermarket

• An individual researches extensively before buying a new computer at the lowest price.

Which of the following best describes a situation where an individual’s buying decisions are affected by the layout, sequence, and range of outcomes available.

• Choice architecture

• Framing

• Rule of thumb

• Anchoring

Which of the following is an example of nudge theory?

• When a restaurant offers a decoy product on a menu to attract consumers to another meal they want to sell

• Selling a product at a lower price to increase sales

•   A firm advertises its product extensively to increase sales

• Where a firm offers a big discount on a product to increase its sales

A business that sells a film streaming service with an annual subscription payment sends a letter to its customers telling them their subscription payment will automatically continue if they ‘do nothing’. Which of the following best describes this method of selling by the business?

• Restricted choice

• Mandated choice

• Default choice

• Choice architecture

How could Nudge Theory be used by the government to reduce carbon emissions?

• Increase indirect tax on petrol/gas

• Pass a law that makes electricity companies install carbon-capturing technology

• Subsidise wind and solar power

• Create a league table of companies that emit the most carbon

Which of the following is a situation where an insurance company automatically rolls over an individual insurance premium to the following year?

• Mandated choice

• Default choice

• Restricted choice

• Choice architecture

Which of the following would not be an objective of a profit maximising firm?

• Where a firm’s buyers try to negotiate the lowest possible price for raw materials

• Flexi-time working is used by the firm to support workers with families

• The firm’s management employ workers on minimum wage contracts

• A pricing strategy used by the firm to increase revenues

Which of the following would not be an example of a firm trying to achieve CSR aims?

• The firm asks its workforce to work from home 3 days a week to improve their work/life balance

• Where a business introduces a new production system that reduces C02 emissions

• A new factory is opened by the firm near a wildlife sanctuary

• The firm’s management ask their advertising agency to make diversity the most important factor in the firm’s new campaign