Refined Economics Irrational Behavior Test - 87+ MCQs: Economics - Irrational Behavior Quiz: Explore the Unpredictable Aspects of Economic Decision-Making

1. What is the 'Deadweight Loss' in economics?

Loss of consumer surplus

Loss of producer surplus

Efficiency in resource allocation

No impact on economic welfare

2. What economic system is characterized by private ownership of the means of production and market-driven decision-making?

Socialism

Communism

Mixed economy

Capitalism

3. What is 'Hyperinflation' in the context of macroeconomics?

Moderate and controlled inflation

Inflation exceeding 10% annually

Elevated and rapidly increasing inflation

Deflationary pressures on the economy

4. What characterizes an 'Inferior Good' in microeconomics?

Demand increases as income increases

Demand decreases as income decreases

Luxury item with elastic demand

Basic necessity with inelastic demand

5. What is the 'Pareto Efficiency' criterion in welfare economics?

Maximizing the wealth of the richest in society

Balancing individual and societal interests

Achieving the highest level of economic inequality

No one can be made better off without making someone worse off

6. What economic concept is illustrated by the 'Tragedy of the Commons'?

Optimal resource allocation

Overuse and depletion of shared resources

Success of collective ownership

Sustainable management of common resources

7. How does 'Herding Behavior' influence economic decision-making?

Encourages individual decision-making

Promotes diverse opinions

Balances market dynamics

Tendency to follow the actions of a larger group

8. What distinguishes 'Heuristics' in decision-making processes?

Long and complex decision-making processes

Objective and logical decision-making

Simplified mental shortcuts or rules of thumb

Random decision-making

9. What is 'Prospect Theory' and how does it differ from expected utility theory?

A theory predicting future market trends

A theory focusing on maximizing utility

A theory describing decision-making under uncertainty

A theory studying optimal resource allocation

10. In behavioral economics, what does the 'Paradox of Choice' suggest?

More choices lead to greater satisfaction

Having fewer choices is preferable

Balancing options leads to optimal decision-making

Too many choices can lead to decision paralysis and dissatisfaction

11. In the context of economic anomalies, what does a high price elasticity of demand indicate?

Small change in quantity demanded for a large change in price

Large change in quantity demanded for a small change in price

No change in quantity demanded regardless of price

Decrease in both price and quantity demanded

12. How does 'Cognitive Dissonance' manifest in decision-making?

Objective evaluation of conflicting information

Avoidance of conflicting beliefs

Balancing opposing viewpoints

Uncomfortable feeling when holding conflicting beliefs

13. What is the primary goal of 'Fiscal Policy' in influencing economic conditions?

Controlling inflation

Managing government spending

Regulating international trade

Achieving full employment and economic growth

14. What does the 'Jevons Paradox' suggest about resource efficiency?

Decrease in efficiency with increased resource use

Efficiency remains constant regardless of resource use

Improvement in efficiency as resources are used more

Resource efficiency is unrelated to economic growth

15. What is the 'Cobra Effect' in economics?

Positive impact of snake conservation programs

Negative consequences of well-intentioned interventions

Efficient pest control strategy

Cobra trade regulation

16. What characterizes the 'Sunk Cost Fallacy,' and how does it contribute to irrational decision-making?

Believing in a streak of success or failure

Preferring inferior goods

Having no impact on decision-making

Continuing an endeavor due to past investments

17. What economic concept is represented by the formula: GDP = Consumption + Investment + Government Spending + Net Exports?

Circular flow of income

Quantity theory of money

Phillips curve

Expenditure approach to GDP

18. How does 'Gross National Product (GNP)' differ from 'Gross Domestic Product (GDP)'?

GDP includes net exports, GNP excludes them

GNP includes net exports, GDP excludes them

Both measure the same economic output

GDP focuses on national income, GNP focuses on domestic income

19. What role does the 'Ultimatum Game' play in understanding irrational behavior?

A game theory experiment to study bargaining and fairness

A stock market simulation

A model for efficient market hypothesis

A measure of inflation rates

20. What economic concept is represented by the formula: M1 = Currency in circulation + Demand deposits + Other liquid assets?

Quantity theory of money

Money multiplier

Velocity of money

Measure of money supply (M1)

21. What characterizes a 'Giffen Good' in microeconomics?

Normal good with elastic demand

Inferior good with inelastic demand

Positive correlation between price and quantity demanded

Negative income elasticity of demand

22. What is the primary function of the 'Central Bank' in a country's monetary system?

Setting fiscal policies

Regulating international trade

Issuing currency and controlling money supply

Managing government spending

23. How does 'Scarcity' impact decision-making in economics?

Ensures unlimited resources for everyone

Leads to overproduction of goods

Requires no economic choices

Forces choices due to limited resources

24. What is the 'Tulip Mania' in economic history?

Rapid industrialization in the tulip industry

Boom and bust in the tulip market during the Dutch Golden Age

Introduction of tulip cultivation techniques

Long-lasting stability in tulip prices

25. What is the primary focus of 'Behavioral Economics'?

Studying market structures

Analyzing individual decision-making

Examining government policies

Investigating international trade patterns

26. What economic term describes the belief that past trends in the market will continue in the future?

Rational expectations

Market momentum

Herd behavior

Regressive forecasting

27. What characterizes a 'Veblen Good' in the context of consumer behavior?

A normal good with elastic demand

A good with an inverse demand curve

A good where higher prices enhance its status or appeal

A good with no impact on consumer preferences

28. How does the 'Monty Hall Problem' challenge intuition in probability?

It supports intuitive decision-making

It has no impact on intuitive reasoning

It demonstrates that intuition can be misleading in probability

It proves the law of supply and demand

29. What is the 'Phillips Curve' used to illustrate in macroeconomics?

Trade-offs between inflation and unemployment

Effects of government spending on GDP

Relationship between interest rates and investment

Impact of taxation on consumer behavior

30. What is the 'Bandwagon Effect' in behavioral economics?

Critical evaluation of popular opinions

Tendency to follow the crowd

Balancing individual perspectives

Independent decision-making

31. What does the 'Baumol's Cost Disease' explain in economics?

Rise in costs of healthcare services

Increasing costs in labor-intensive industries

Decline in manufacturing costs

Effects of inflation on production costs

32. What does 'Perfectly Elastic Demand' imply about the responsiveness of quantity demanded to changes in price?

Quantity demanded is highly responsive to price changes

Quantity demanded is not responsive to price changes

Quantity demanded has an inverse relationship with price

Quantity demanded remains constant regardless of price changes

33. How does 'Gini Coefficient' measure economic inequality?

It measures total income in an economy

It quantifies the gap between rich and poor

It evaluates government intervention in the economy

It assesses the overall economic growth

34. In the context of economic decision-making, what does 'Anchoring' refer to?

Steady economic growth

Fixation on initial information when making decisions

Diversification of investment portfolios

Dynamic market shifts

35. What does 'Regulatory Capture' imply in regulatory economics?

Effective oversight by regulatory agencies

Government intervention in free markets

Control of regulatory agencies by the industries they regulate

Absence of regulations in a particular industry

36. What term refers to the measure of responsiveness of the quantity of a good demanded to changes in income?

Price elasticity of demand

Income elasticity of demand

Cross-price elasticity

Price elasticity of supply

37. How does 'Gini Coefficient' measure income inequality?

Higher coefficient indicates lower inequality

Lower coefficient indicates lower inequality

Zero coefficient indicates perfect equality

Coefficient measures wealth, not income, inequality

38. What is the 'Regret Aversion Bias' in behavioral economics?

Balancing past decisions with future opportunities

Avoidance of regret in decision-making

Objective evaluation of past choices

Embracing the outcomes of past decisions

39. How does 'Loss Aversion' impact economic decisions, and what role does it play in irrational behavior?

Believing in a streak of success or failure

Having no impact on decision-making

Preferring the current state over alternatives

Fearing losses more than equivalent gains

40. What is the 'Hindsight Bias' in behavioral economics?

Learning from past experiences

Overestimating one's predictive abilities after an event

Balancing foresight and hindsight

Avoiding biased judgment of past events

41. How does 'Supply and Demand' determine market prices in a competitive economy?

Government intervention sets prices

Random fluctuations in prices

The interaction of buyers and sellers

Prices are fixed by sellers

42. What is the economic term for the total value of all goods and services produced by a country in a specific time period?

Gross National Product (GNP)

Net Domestic Product (NDP)

Gross Domestic Product (GDP)

National Income

43. What is the 'Endowment Effect,' and how does it contribute to irrational economic behavior?

Preferring known risks over unknown risks

Having no impact on decision-making

Assigning higher value to owned items

Encouraging conservative choices

44. What is 'Time Inconsistency' in the realm of economic decision-making?

Consistent evaluation of time

Balancing short-term and long-term goals effectively

Inconsistency in decision-making over time

Stable decision-making patterns

45. How does the 'Dunning-Kruger Effect' impact economic decisions, and what role does it play in irrational behavior?

Preferring inefficient outcomes

Having no impact on decision-making

Overestimating one's own abilities

Encouraging equitable distribution of resources

46. In the context of irrational behavior, what does 'Overconfidence Bias' refer to?

Excessive trust in one's own abilities or knowledge

Lack of confidence in decision-making

Balanced self-assessment

Objective evaluation of risks

47. What is 'Opportunity Cost,' and how does it influence economic decision-making?

The value of the next best alternative forgone

The monetary cost of an opportunity

Having no impact on decision-making

The total cost of an economic endeavor

48. How does 'Elasticity of Supply' measure the responsiveness of quantity supplied to changes in price?

High elasticity indicates a small change in quantity supplied for a large change in price

Low elasticity indicates a small change in quantity supplied for a small change in price

Perfectly elastic supply implies no change in quantity supplied with a price change

Elasticity of supply has no impact on quantity supplied

49. What characterizes 'Pareto Efficiency' in welfare economics?

Maximum total utility for all individuals

Equal distribution of wealth

Optimal allocation of resources with no one worse off

Maximum government intervention in the economy

50. In economic theory, what is the 'Tragedy of the Commons'?

Overproduction of goods

Underproduction of goods

Overexploitation of shared resources

Efficient allocation of resources