Splendid Economics Bounded Rationality Test - 65+ MCQs: Economics - Bounded Rationality Quiz: Explore Decision-Making Under Cognitive Constraints

1. How does bounded rationality differ from perfect rationality?

Bounded rationality is based on emotion

Bounded rationality considers cognitive limitations

Bounded rationality always leads to optimal decisions

Bounded rationality ignores external factors

2. Which of the following is a limitation of rational choice theory?

Assumes perfect information

Considers cognitive biases

Accounts for bounded rationality

Incorporates emotional factors

3. In behavioral economics, what is the 'endowment effect'?

Valuing owned items more than their market worth

Desire to acquire more possessions

Preference for familiar choices

Ignoring potential losses

4. How does the concept of 'heuristics' relate to bounded rationality?

Heuristics involve unlimited cognitive resources

Heuristics have no impact on decision outcomes

Heuristics are decision-making shortcuts used under cognitive constraints

Heuristics only work in controlled environments

5. Who coined the term 'bounded rationality'?

John Maynard Keynes

Herbert Simon

Milton Friedman

Adam Smith

6. Which of the following is a 'giffen good'?

Rice in poor countries

Luxury cars

Diamond jewelry

Designer clothing

7. What is bounded rationality?

Perfectly rational decision making

Irrational decision making

Limited rationality

Economic optimization

8. Which behavioral economics principle suggests that individuals overvalue small probabilities and undervalue large probabilities?

Probability weighting

Utility maximization

Expected utility theory

Risk aversion

9. Which theory suggests that individuals often rely on heuristics when making decisions?

Rational choice theory

Prospect theory

Game theory

Heuristic theory

10. What is 'Tulip Mania'?

A stock market bubble in the 1920s

A financial crisis in the 2000s

An economic boom in the 19th century

A historical speculative bubble in the price of tulip bulbs