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

1. How does 'Loss Aversion' affect decision-making in Prospect Theory?

It encourages risk-taking behavior

It has no impact on decision-making

It leads individuals to avoid losses more than they seek equivalent gains

It promotes objective evaluation of potential losses

2. How does 'Choice Architecture' relate to decision-making principles in Prospect Theory?

Encouraging risk-taking behavior

Having no impact on decision-making

Influencing decisions by structuring choices

Promoting loss aversion

3. How does 'Status Quo Bias' influence decision-making in Prospect Theory?

Encouraging risk-taking behavior

Promoting loss aversion

Leading individuals to prefer the current state of affairs

Having no impact on decision-making

4. In Prospect Theory, what is 'Regret Aversion'?

Seeking uncertain outcomes

Preferring uncertain outcomes

Desiring to avoid the emotional pain of regret

Objective evaluation of potential outcomes

5. 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

6. How does 'Heuristics' contribute to decision-making within Prospect Theory?

By promoting loss aversion

By encouraging risk-taking behavior

By providing quick decision-making shortcuts

By eliminating cognitive biases

7. 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

8. 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

9. What is the primary focus of Prospect Theory in economics?

Optimal resource allocation

Decision-making under certainty

Rational decision-making

Decision-making under uncertainty

10. How does 'Mental Accounting' contribute to decision-making within Prospect Theory?

Encouraging risk-taking behavior

Having no impact on decision-making

Categorizing economic outcomes based on perceived value

Promoting loss aversion