Ultimate Economics Game Theory In Behavioral Economics Test - 89+ MCQs: Economics - Game Theory in Behavioral Economics Quiz: Master the Intersection of Strategy and Behavior

1. Which economic indicator measures the average level of prices in an economy?

Unemployment rate

Gross Domestic Product (GDP)

Consumer Price Index (CPI)

Balance of Trade

2. What is the 'Winner's Curse' in Auction Theory?

When the winning bid exceeds the actual value of the item

The feeling of regret after winning an auction

The strategy of bidding slightly higher than one's valuation

The phenomenon where winners of auctions tend to lose in future auctions

3. What is 'Asymmetric Information' in the context of Economics?

A situation where all players have equal information

A scenario where one party has more or better information than the other

The balance of information among market participants

The influence of public knowledge on decision-making

4. What does 'Bounded Rationality' refer to in Behavioral Economics?

The idea that individuals act rationally within the constraints of limited information and cognitive capabilities

The assumption that individuals always make optimal decisions

The tendency to overvalue losses compared to equivalent gains

The belief that past outcomes influence future decisions

5. What does 'Inflation' refer to?

A sustained increase in the overall level of prices for goods and services

A decline in the overall level of prices for goods and services

The rate at which the economy is growing

The total value of all goods and services produced in an economy

6. What market structure is characterized by a large number of sellers and buyers with homogeneous products?

Monopoly

Oligopoly

Perfect competition

Monopolistic competition

7. Which economic concept refers to a situation where one party has more or better information than the other?

Perfect Competition

Information Asymmetry

Market Equilibrium

Supply and Demand

8. What does Behavioral Economics study?

The economic analysis of human behavior

The impact of psychological factors on economic decisions

The study of market behaviors

The mathematical modeling of economic systems

9. What is the concept of 'Hyperbolic Discounting'?

The tendency to prioritize immediate rewards over future benefits

The belief that past outcomes influence future decisions

The reliance on external cues to guide decision-making

The overestimation of one's abilities in forecasting future events

10. What is the primary purpose of international trade?

Achieving political dominance

Promoting cultural exchange

Maximizing government revenue

Increasing efficiency and welfare through specialization and exchange

11. What is 'Utility' in Economics?

The total revenue of a firm

The satisfaction or pleasure derived from consuming goods and services

The amount of resources available in an economy

The rate of inflation in an economy

12. Which economic model explores how individuals make decisions based on the perceived actions of others?

Rational Expectations

Game Theory

Utility Maximization

Supply and Demand

13. In Behavioral Economics, what does the 'endowment effect' suggest?

Preference for immediate rewards

Overvaluing items simply because they are owned

Ignoring sunk costs

Optimistic bias in decision-making

14. What is the main role of a market economy?

Government ownership of all resources

Centralized planning of production

Private ownership of resources and decentralized decision-making

Equal distribution of wealth

15. What is a 'Public Good' in Economics?

A good that is provided by the government

A good that is non-excludable and non-rivalrous

A good that is produced without any cost

A good that is produced only by private companies

16. What is the function of a central bank's monetary policy?

Regulating interest rates

Controlling government spending

Overseeing international trade

Managing fiscal policy

17. What is the 'Tragedy of the Commons'?

A situation where individual rationality leads to collective irrationality in resource usage

The economic concept explaining the cyclical nature of booms and busts

The dilemma faced by governments in deciding fiscal policy

The phenomenon where public goods are overproduced due to excessive demand

18. Which term in Game Theory refers to a strategy that yields the best outcome for a player regardless of the strategies chosen by others?

Cooperative Strategy

Nash Equilibrium

Dominant Strategy

Mixed Strategy

19. Which economic concept refers to the total value of all final goods and services produced within a country's borders in a specific time period?

Gross National Product (GNP)

Net Domestic Product (NDP)

Gross Domestic Product (GDP)

National Income

20. Which concept in Behavioral Economics involves the tendency to undervalue or ignore future benefits in favor of immediate rewards?

Endowment Effect

Hyperbolic Discounting

Anchoring Bias

Loss Aversion

21. Which of the following is a characteristic of a 'Public Good'?

It is rivalrous in consumption

It is excludable

It is non-excludable and non-rivalrous

It is produced by the government

22. What is the 'Principal-Agent Problem'?

The challenge of aligning the interests of shareholders and management

The dilemma faced by policymakers in designing effective regulations

The difficulty of balancing short-term gains with long-term objectives

The risk of external factors influencing market outcomes

23. In Game Theory, what is a 'zero-sum game'?

A game where one player's gain is equal to another player's loss

A game with multiple outcomes

A game without a clear winner

A game where cooperation is essential

24. In the context of Behavioral Economics, what is 'Mental Accounting'?

The tendency to categorize and treat money differently based on its source, purpose, or intended use

The systematic errors in judgment that individuals make due to cognitive biases

The process of calculating the future value of money

The study of how individuals allocate their time and resources

25. In Game Theory, what is a 'Mixed Strategy'?

A strategy that is random and involves multiple actions with specific probabilities

A strategy that combines elements from different games

A strategy where players cooperate to maximize joint payoffs

A strategy that guarantees a win for one player

26. What is the Nash Equilibrium in Game Theory?

A state where all players lose

A stable state where no player has an incentive to deviate unilaterally

An equilibrium achieved through coercion

A situation with maximum competition

27. What does 'Game Theory' study?

The behavior of firms in competitive markets

The interaction among rational decision-makers

The effects of government interventions

The dynamics of market supply and demand

28. What does the 'Endowment Effect' suggest?

Individuals tend to value items more highly simply because they own them

Prices of goods are determined by their production costs

People only consider the ends and not the means

An individual's preferences remain constant over time

29. What is the Prisoner's Dilemma in Game Theory?

A game where cooperation leads to the best outcome for both players

A situation where players have complete information about each other's strategies

A scenario illustrating why two individuals might not cooperate, even if it's beneficial

A game with a guaranteed outcome for one player

30. Which behavioral bias involves placing greater importance on immediate rewards over future gains?

Recency bias

Anchoring bias

Hyperbolic discounting

Confirmation bias

31. What does the Law of Supply state?

Quantity supplied decreases as price increases

Quantity supplied remains constant

Quantity supplied increases as price increases

Quantity supplied is unrelated to price

32. What does the 'Winner's Curse' refer to in Auction Theory?

The tendency for the winning bidder to overpay in an auction

The advantage that the auctioneer has over the bidders

The strategy of always bidding the maximum amount

The tendency for the auction to end in a tie

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

Studying rational decision-making

Examining the effects of government policies

Understanding psychological influences on economic decisions

Analyzing market equilibrium

34. Which market structure is characterized by a single seller with no close substitutes?

Oligopoly

Perfect competition

Monopolistic competition

Monopoly

35. Which economist is known for his work on Prospect Theory?

John Nash

John Maynard Keynes

Daniel Kahneman

Milton Friedman

36. What does 'Asymmetric Information' signify?

A situation where one party in a transaction has more or better information than the other

Equal knowledge and information shared between parties in an economic exchange

The condition where all market participants have access to identical information

The principle that information should be distributed equally in a market

37. Which economic concept describes the tendency to overvalue things simply because we own them?

Loss Aversion

Endowment Effect

Confirmation Bias

Hyperbolic Discounting

38. In Game Theory, what is a 'Focal Point'?

A strategy that is most likely to be chosen based on common knowledge and salience

A point where all strategies converge

A point that maximizes the payoff for all players

A strategy that is always dominated by other strategies

39. What does 'Pareto Efficiency' represent?

A situation where one person's utility cannot be increased without decreasing another's

A scenario where resources are allocated in the most equitable manner

The optimal level of production in an economy

A condition where markets are perfectly competitive

40. What is a Common-pool Resource?

A resource owned by an individual or a group

A resource where one person's use reduces its availability for others

A resource managed by a centralized authority

A resource that is freely available to all

41. What is 'Asymmetric Information' in Economics?

A situation where all market participants have equal access to information

The balance of information among market participants

A scenario where one party has more or superior information compared to others

The influence of public knowledge on decision-making

42. What is the 'Sunk Cost Fallacy'?

The belief that past expenses should influence future decisions

The overestimation of one's abilities

The tendency to value items more when they are owned

The preference for immediate rewards over future benefits

43. What is the concept of 'Adverse Selection'?

The tendency to select options that are against one's best interest

A situation where sellers have more information than buyers

The process of eliminating poor choices

The tendency for the quality of goods to decline over time

44. In the context of Behavioral Economics, what does 'Anchoring' refer to?

The tendency to rely heavily on the first piece of information encountered

The influence of external factors on market prices

The reliance on past outcomes to guide future decisions

The tendency to overestimate one's abilities in decision-making

45. What is 'Perfect Information' in Game Theory?

A situation where players have complete and accurate knowledge about the game

A game with no uncertainty or randomness

A scenario where all players have equal resources

A game where players always cooperate

46. Which concept in Behavioral Economics involves making decisions based on available information and beliefs about the outcomes?

Prospect Theory

Utility Maximization

Rational Choice Theory

Information Asymmetry

47. What is 'Monopolistic Competition'?

A market structure with a single seller and many buyers

A situation where a few large firms dominate the market

A market structure with many sellers offering differentiated products

A market with identical products and many sellers

48. What is a 'public good' in economics?

Goods provided by private companies

Goods that are non-excludable and non-rivalrous

Goods produced for export

Goods available only to government employees

49. What is 'Bounded Rationality'?

The belief that individuals always make decisions based on rational calculations

The idea that decision-makers have limited cognitive processing capabilities

The tendency to overestimate one's abilities in decision-making

The reliance on past outcomes to guide future decisions

50. What does 'Prospect Theory' emphasize in Behavioral Economics?

The influence of peer pressure on decision-making

The rational calculation of expected utility

The effects of government policies on consumer behavior

How individuals perceive potential losses and gains

Economics - Game Theory in Behavioral Economics MCQ Test 1