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

1. 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

2. What is 'Loss Aversion' in the context of behavioral economics?

The tendency to prefer current gains over future gains

Aversion to any form of loss, regardless of potential gains

Preference for long-term gains over short-term gains

The principle of diminishing marginal utility

3. What does 'Creative Destruction' signify in economic theory?

Positive impact of innovation on economic growth

Balance between creation and preservation of wealth

Continuous replacement of outdated industries by new ones

Protection of traditional economic structures

4. 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

5. What economic term describes the maximum amount a consumer is willing to pay for a good or service?

Consumer surplus

Producer surplus

Market equilibrium

Deadweight loss

6. 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

7. In the context of irrational behavior, what does 'Bounded Rationality' refer to?

Unlimited cognitive capacity in decision-making

Perfectly rational decision-making

Decision-making within the limits of available information and cognitive resources

Random decision-making

8. 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

9. What is the 'Broken Window Fallacy' in economic reasoning?

Belief that destruction stimulates economic growth

Theory that broken windows create job opportunities

Idea that visible economic activity is always beneficial

Misinterpretation of supply and demand dynamics

10. 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

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

Socialism

Communism

Mixed economy

Capitalism

12. 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

13. How does the 'Tversky and Kahneman Framing Effect' demonstrate the influence of presentation?

It supports objective decision-making

It highlights the importance of body language

It showcases that the way information is presented influences decisions

It proves the law of supply and demand

14. 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)

15. 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

16. What role does 'Hyperbolic Discounting' play in economic decision-making?

Prioritizing long-term benefits over short-term gains

Preferring smaller, immediate rewards over larger, delayed rewards

Balancing immediate and delayed rewards effectively

Minimizing the impact of time on decision-making

17. 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

18. 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

19. What does 'Prisoner's Dilemma' demonstrate in game theory?

Optimal strategy for cooperation

Collaborative decision-making

Challenges of rational decision-making

Tension between individual and collective interests

20. 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

21. 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

22. 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

23. 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

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

Studying market structures

Analyzing individual decision-making

Examining government policies

Investigating international trade patterns

25. 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

26. 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

27. 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

28. 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

29. 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

30. What is 'Opportunity Cost' in economics?

Cost incurred in seizing an opportunity

Total cost of production

Value of the next best alternative foregone

Cost associated with unexpected opportunities

31. 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

32. What impact does the 'Status Quo Bias' have on decision-making?

Encourages dynamic decision-making

Resistance to change from the current state

Promotes risk-taking behavior

Balances opposing viewpoints

33. 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

34. 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

35. How does 'Moral Hazard' influence decision-making in the context of financial markets?

Encourages ethical decision-making

Discourages risk-taking behavior

Promotes transparency in financial transactions

Leads to increased risk-taking due to reduced consequences

36. 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

37. What is 'Herd Mentality' and how does it contribute to economic decisions characterized by irrational behavior?

Encouraging fair resource allocation

Having no impact on decision-making

Preferring inefficient outcomes

Following the crowd without independent thinking

38. 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

39. How does the 'Framing Effect' influence decision-making?

Objective evaluation of information

Providing a neutral perspective

The way information is presented affects decisions

Balancing contrasting viewpoints

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

Overproduction of goods

Underproduction of goods

Overexploitation of shared resources

Efficient allocation of resources