Splendid Economics Prospect Theory Test - 90+ MCQs: Economics - Prospect Theory Quiz: Explore Behavioral Economics with 5 Intriguing Questions

1. What role does 'Information Asymmetry' play in economic decision-making?

Encouraging efficient resource allocation

Having no impact on decision-making

Preferring inefficient outcomes

Unequal distribution of information between parties

2. How does 'Affect Heuristic' influence decision-making according to Prospect Theory?

Encouraging risk-taking behavior

Having no impact on decision-making

Being guided by emotional responses to stimuli

Promoting loss aversion

3. How does the 'Reflection Effect' contribute to Prospect Theory?

It encourages risk-taking behavior

It has no impact on decision-making

It leads to different evaluations of gains and losses

It promotes objective evaluation of potential outcomes

4. What characterizes the 'Peak-End Rule' and its relevance in Prospect Theory?

Encouraging risk-taking behavior

Having no impact on decision-making

Evaluating experiences based on peak moments and end results

Promoting loss aversion

5. What is 'Hyperbolic Discounting' in the context of Prospect Theory?

Encouraging risk-taking behavior

Preferring immediate rewards over delayed ones

Having no impact on decision-making

Promoting loss aversion

6. How does 'Preference for Flexibility' influence decision-making according to Prospect Theory?

Promoting loss aversion

Encouraging risk-taking behavior

Having no impact on decision-making

Preferring options that allow for future adjustments

7. How does 'Neuroeconomics' relate to the principles of Prospect Theory?

Encouraging risk-taking behavior

Studying the neural basis of economic decision-making

Having no impact on decision-making

Promoting loss aversion

8. How does 'Cobra Effect' illustrate the unintended consequences of economic decisions?

Encouraging efficient resource allocation

Having no impact on decision-making

Preferring inefficient outcomes

Unintended negative outcomes from well-intentioned actions

9. What does 'Temporal Discounting' refer to in the context of Prospect Theory?

The preference for future gains over present gains

The tendency to avoid future losses

The disregard for future outcomes in decision-making

The devaluation of future gains and losses

10. How does 'Anchoring Effect' influence decision-making according to Prospect Theory?

Encouraging risk-taking behavior

Having no impact on decision-making

Being influenced by initial reference points

Promoting loss aversion

11. What is the 'Gini Coefficient' and its significance in economic analysis?

Encouraging income inequality

Measuring income inequality

Having no impact on decision-making

Preferring inefficient outcomes

12. How does 'Pigovian Tax' contribute to economic decision-making related to externalities?

Encouraging income inequality

Having no impact on decision-making

Imposing taxes to correct market externalities

Preferring inefficient outcomes

13. How does the 'Overconfidence Bias' impact decision-making within Prospect Theory?

Encouraging conservative choices

Having no impact on decision-making

Promoting risk-taking behavior

Preferring the current state over alternatives

14. What is 'Asymmetric Paternalism' and its role in behavioral economics within Prospect Theory?

Encouraging risk-taking behavior

Promoting loss aversion

Having no impact on decision-making

Balancing paternalistic interventions to correct biases

15. What does the 'Endowment Effect' represent in the context of Prospect Theory?

It has no relevance to Prospect Theory

It promotes loss aversion

It influences how individuals value what they already possess

It encourages risk-taking behavior

16. What role does 'Endowment Effect' play in decision-making within Prospect Theory?

Promoting loss aversion

Encouraging risk-taking behavior

Having no impact on decision-making

Assigning higher value to owned items

17. What role does 'Loss Aversion' play in decision-making within Prospect Theory?

Preferring options that allow for future adjustments

Encouraging risk-taking behavior

Having no impact on decision-making

Placing greater emphasis on avoiding losses than acquiring equivalent gains

18. What role does 'Probability Weighting' play in Prospect Theory?

Encouraging risk-taking behavior

Having no impact on decision-making

Adjusting perceived probabilities in decision-making

Promoting objective evaluation of potential outcomes

19. How does 'Preference Construction' contribute to decision-making within Prospect Theory?

Encouraging risk-taking behavior

Having no impact on decision-making

Constructing preferences based on available information

Promoting loss aversion

20. What characterizes the concept of 'Veblen Effect' in the context of economic decisions?

Encouraging frugal spending

Having no impact on decision-making

Preferring inferior goods

Purchasing goods for social status

21. How does 'Prospect Reference Points' contribute to decision-making within Prospect Theory?

By eliminating cognitive biases

By encouraging risk-taking behavior

By providing a standard for evaluating outcomes

By promoting loss aversion

22. In Prospect Theory, what defines the 'Endowment Effect'?

Promoting loss aversion

Encouraging risk-taking behavior

Having no impact on decision-making

Assigning higher value to owned items

23. How does 'Reflection Effect' contribute to Prospect Theory?

Encouraging risk-taking behavior

Having no impact on decision-making

Leading to different evaluations of gains and losses

Promoting objective evaluation of potential outcomes

24. According to Prospect Theory, how do individuals typically evaluate potential gains and losses?

Rationally and objectively

Ignoring potential losses

In isolation from each other

In relation to a reference point

25. What is the concept of 'Sunk Cost Fallacy' and how does it relate to Prospect Theory?

Encouraging risk-taking behavior

Persisting with a decision based on invested resources

Having no impact on decision-making

Promoting loss aversion

26. In Prospect Theory, what characterizes the concept of 'Trade-off Difficulty'?

The ease of making decisions

The tendency to avoid decision-making

The difficulty of evaluating potential gains and losses

The avoidance of trade-offs

27. What is 'Creative Destruction' and its role in economic decision-making processes?

Encouraging income inequality

Having no impact on decision-making

Preferring inefficient outcomes

Constantly replacing old economic structures with new ones

28. How does 'Social Preferences' influence decision-making within Prospect Theory?

Promoting loss aversion

Having no impact on decision-making

Encouraging risk-taking behavior

Considering the impact of decisions on others

29. What is 'Heuristics' and its role in decision-making principles within Prospect Theory?

Encouraging risk-taking behavior

Having no impact on decision-making

Efficient cognitive shortcuts used in decision-making

Promoting loss aversion

30. What characterizes the concept of 'Decoy Effect' in Prospect Theory?

Encouraging risk-taking behavior

Having no impact on decision-making

The phenomenon where adding an irrelevant option influences choices

Promoting loss aversion