UC Irvine SOC 138/ECO 149 – Midterm Exam 2

UC Irvine SOC 138/ECO 149 – Midterm Exam 2

Subject: Economics    / General Economics
Question
SOC 138/ECO 149 Midterm Exam 2 (SAMPLE ONLY)
Carter T. Butts
Fall Quarter, 2009 sh is
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as Midterm Exam 2. TAs will provide solutions to this sample exam during discussion section. Study this exam carefully – some questions may return!

1. Fill in the blank: Anchoring and adjustment can lead to a “money pump” through the phenomenon known as —————.
A. transitivity B. consistency bias
C. confabulation D. preference reversal
E. cold reading 2. Fill in the blank: Remembering is best described as a(n) ————— process.
A. rational B. reconstructive
C. deliberate
D. error-free
E. conscious Th

3. Fill in the blank: In Kahneman and Tversky’s famous “Linda the Bank Teller” problem, the
judgment made by most subjects is thought to result from —————.
A. overfitting B. the pseudocertainty effect
C. rational judgment D. the representativeness heuristic
E. the endowment effect

4. Which of the following errors in reasoning is typical of belief in a “law of small numbers?”
A. Seeking out evidence which confirms a hypothesis
B. Confusing likelihoods and posteriors
C. Interpretation of chance deviations as causally significant
D. Ignoring prior information in making judgments
E. Underweighting of the likelihood

5. What fallacious belief regarding training results from a misunderstanding of the regression effect?
A. Skills improvement is best assessed by participant self-evaluation
B. There is no limit to human performance sh is
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6. Which of the following best describes the representativeness heuristic?
A. The representation of a concept determines its meaning
B. All judgments must be made via Bayes’ Theorem C. People and events which appear similar must be similar in all respects
D. You can always rely on a representative to make decisions for you
E. Representativeness depends on rational judgment

7. Fill in the blank: A marketer tells you that their product resulted from a “$1.5 million development effort.” This is best described as an attempt to —————.
A. blame failure on the consumer B. play up successes while playing down failures C. imply that they are showing only a sample of their product’s full capabilities Th D. establish authority E. place the burden of sense-making on the consumer

8. Which of the following is not a fallacy associated with the representativeness heuristic?
A. Conservatism B. Fallacious imputation C. Censoring of extreme probabilities
D. Base rate neglect
E. Conjunctive fallacyThe following applies to questions 9–11 below. Consider the problem of predicting the probability  that a new technology startup will survive for at least five years. Based on previous cases of tech
startups in your area, you have found the following information regarding those which have survived
for at least five years (“Survivors”), versus those who have not (“Non-survivors”):
Characteristic
Annual Revenue > $1,000,000
Annual Revenue ? $1,000,000
Total Debt > $750,000
Total Debt ? $750,000 Survivors
90%
10%
(2)
(2) Non-survivors
(1)
(1)
(3)
(3) sh is
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a total debt of $900,000 and an annual revenue of $1,350,000 will survive for at least five years.
Given the resources available to you, you can obtain information to aid your decision from only
one of the pairs of cells marked (1)–(3) above.

9. Given that your purpose is to make an optimal decision, the information in which pair of cells
would be objectively most useful?
A. The pair of cells marked (1)
B. The pair of cells marked (2) C. The pair of cells marked (3) D. Any of the pairs would be equally useful E. It is impossible to determine this without additional information

10. When presented with a problem like this one, which pair of cells do most subjects tend to
choose?
A. The pair of cells marked (1)
B. The pair of cells marked (2) C. The pair of cells marked (3) D. All pairs are chosen with equal frequency E. It is impossible to determine this without additional information Th

11. Fill in the blank: The cell pair which most subjects choose, given a problem of this kind, is
indicative of ———-.
A. the endowment effect
B. the regression effect
C. rational behavior
D. overconfidence E. pseudodiagnosticity

12. Fill in the blank: The marketing tactic of presenting a high comparison price range when selling
a good whose price is not fixed is based on —————.
A. the endowment effect
B. base rate neglect
C. anchoring and adjustment
D. representativeness
E. confirmation bias

13. Fill in the blank: Belief in the “hot hand” is bolstered by —————-.
A. confirmation from statistical analyses of empirical data sh is
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E. the pseudocertainty effect

14. Fill in the blank: According to Denrell (2005), assessing the effectiveness of a business practice
by studying only existing firms leads to ———–.
A. overestimation of the effectiveness of risky practices
B. underappreciation for the value of innovation
C. a bias towards safety strategies
D. a reduction in hindsight bias E. more accurate estimates of impact on profitability

15. During the boom of the later 1990s, buy-and-hold investment strategies were extremely popular;
after the boom ended, they became considered unwise by many. Based on what was discussed in
class, which of the following phenomena would be the most plausible reason for the dramatic shift
in perception? Th A. Conservatism in probability judgments made investors slow to change strategies
B. The endowment effect made investors less willing to sell their current holdings
C. Confirmation bias lead investors to see themselves as extremely competent D. Prior knowledge of long-term market trends allowed most investors to perceive that
the dot-com bubble was about to burst
E. Short-term fluctuations in market performance were exaggerated by belief in the law
of small numbers

16. Fill in the blank: Hyman (1977) found that college students were most likely to think that a
generic vignette applied specially to them when its positive items were seen as ————— and its
negative items were seen as —————.
A. conventional; implausible
B. common; serious
C. specific; general
D. specific; abnormal
E. unusual; taken for granted

17. In 1933, Horace Secrist claimed what discovery regarding American firms? sh is
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C. Poor-performing firms were unaffected by regression to the mean D. All firms in the US economy were tending, on average, towards mediocrity
E. The regression effect held for firm profitability over time

18. Fill in the blank: Association formation, conditioning, memory, pattern recognition are all
examples of —————- processes.
A. deliberative
B. rational C. Bayesian
D. low-level E. conscious

19. Fill in the blank: Watson’s (1960) experiments with number sequences found that —————.
A. Subjects focused exclusively on disconfirming evidence, and were unable to guess the
latent rule Th B. Subjects jumped to conclusions regarding the latent rule, because they did not seek
disconfirming evidence
C. Subjects quickly realized that there was no rule, and were not fooled by the experimental manipulation
D. No patterns emerged from the subject behaviors E. Nearly all subjects could guess the underlying rule within two attempts, because of
natural human pattern recognition abilities

20. Fill in the blank: One reason a marketing firm might label a product with a long and checkered
past as “new” and “innovative” would be —————.
A. to form a negative association with a competitor’s product
B. to activate the endowment effect
C. to exploit the conjunctive fallacy
D. to persuade customers to ignore their prior information Th sh is
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