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

1. How does 'Perfect Competition' differ from 'Monopoly' in market structures?

Single seller in perfect competition, multiple sellers in monopoly

Homogeneous products in perfect competition, differentiated products in monopoly

High barriers to entry in perfect competition, low barriers in monopoly

No price discrimination in perfect competition, price discrimination in monopoly

2. 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

3. What does the 'Laffer Curve' depict in fiscal policy?

Inverse relationship between tax rates and tax revenue

Direct relationship between government spending and GDP

Impact of interest rates on investment

Optimal level of government debt

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. How does the 'Sunk Cost Fallacy' impact decision-making?

Encourages consideration of future costs

Considers only present costs

Ignores past costs in decision-making

Leads to irrational decisions based on past investments

14. 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

15. 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

16. 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

17. 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

18. 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

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

Studying market structures

Analyzing individual decision-making

Examining government policies

Investigating international trade patterns

20. How does the 'Allais Paradox' challenge the principles of expected utility theory?

It validates expected utility theory

It supports risk-neutral decision-making

It highlights inconsistencies in decision-making under risk

It proves the law of supply and demand

21. What is the purpose of 'Monetary Policy' in influencing economic conditions?

Regulating international trade

Controlling inflation

Setting fiscal policies

Managing government spending

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

Loss of consumer surplus

Loss of producer surplus

Efficiency in resource allocation

No impact on economic welfare

23. 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

24. 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

25. 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

26. 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

27. What does the 'Law of Diminishing Marginal Utility' state about consumer satisfaction?

Satisfaction increases with each additional unit consumed

Satisfaction remains constant regardless of consumption

Satisfaction decreases with each additional unit consumed

Satisfaction depends on the total consumption

28. In behavioral economics, what is the 'Dunning-Kruger Effect' related to?

Overestimating one's own abilities or knowledge

Underestimating the abilities of others

Balancing self-perception

Maximizing cognitive biases

29. 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

30. 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