Cognitive Biases: Uncover the Systematic Errors in Your Thinking

Question 1

Which of the following is a strategy for mitigating the influence of cognitive biases in economic decision-making?

Accepted Answer

Educating oneself about biases

Answer

Relying solely on intuition

Answer

Ignoring information that contradicts one's beliefs

Question 2

Which of the following scenarios demonstrates the scarcity bias, where consumers place a higher value on items perceived as rare or limited?

Accepted Answer

Consumers purchase more expensive products labeled as 'limited edition'.

Answer

Consumers favor generic products offered in larger package sizes.

Answer

Consumers prefer products marketed as 'new and improved'.

Answer

Consumers are more likely to buy products endorsed by celebrities.

Question 3

Which of the following is the best definition of a cognitive bias?

Accepted Answer

A systematic error in thinking that can lead to irrational decisions

Answer

A way of thinking that is specific to a particular culture

Answer

A mental shortcut that helps us to make decisions quickly

Answer

A belief that is based on emotion rather than logic

Question 4

The tendency to overestimate the probability of an event based on its ease of recall is known as which cognitive bias?

Accepted Answer

Availability heuristic

Answer

Framing effect

Answer

Hindsight bias

Answer

Representativeness heuristic

Question 5

Which cognitive bias leads individuals to seek out information that confirms their existing beliefs?

Accepted Answer

Confirmation bias

Answer

Bandwagon effect

Answer

Status quo bias

Answer

Anchoring

Question 6

The tendency to use an initial piece of information as a reference point in making subsequent judgments is known as:

Accepted Answer

Anchoring bias

Answer

Illusion of superiority

Answer

Sunk cost fallacy

Answer

Representativeness heuristic

Question 7

Which of the following is a strategy for minimizing the impact of cognitive biases on decision-making?

Accepted Answer

Actively seeking out diverse perspectives

Answer

Ignoring evidence that contradicts beliefs

Answer

Relying solely on instinct

Answer

Avoiding making important decisions

Question 8

The tendency to prefer a certain outcome even if it is associated with a higher risk is referred to as:

Accepted Answer

Loss aversion

Answer

Risk aversion

Answer

Framing effect

Answer

Ambiguity aversion

Question 9

Which cognitive bias is characterized by a tendency to follow the crowd?

Accepted Answer

Bandwagon effect

Answer

Illusion of superiority

Answer

Self-serving bias

Answer

Anchoring

Question 10

Which cognitive bias is characterized by a tendency to favor information that aligns with our existing beliefs?

Accepted Answer

Confirmation Bias

Answer

Framing Effect

Answer

Anchoring Bias

Answer

Availability Bias

Question 11

Overestimating the significance of recent events is known as:

Accepted Answer

Recency Bias

Answer

Hindsight Bias

Answer

Availability Bias

Answer

Anchoring Bias

Question 12

Tendency to evaluate someone solely based on a single trait or behavior is known as:

Accepted Answer

Halo Effect

Answer

Hindsight Bias

Answer

Primacy Effect

Answer

Confirmation Bias

Question 13

Believing that an outcome was predictable after it has already occurred is referred to as:

Accepted Answer

Hindsight Bias

Answer

Anchoring Bias

Answer

Framing Effect

Question 14

Relying on emotional reactions rather than logical reasoning in decision-making is a feature of:

Accepted Answer

Affect Heuristic

Answer

Availability Bias

Answer

Anchoring Bias

Answer

Overconfidence Bias

Question 15

Estimating the likelihood of an event based on its ease of recall is a cognitive bias known as:

Accepted Answer

Availability Bias

Answer

Framing Effect

Answer

Confirmation Bias

Answer

Representativeness Bias

Question 16

Tendency to make decisions influenced by the way information is presented is referred to as:

Accepted Answer

Framing Effect

Answer

Overconfidence Bias

Answer

Anchoring Bias

Answer

Confirmation Bias

Question 17

Which cognitive bias refers to the exaggerated belief in one's own abilities?

Accepted Answer

Overconfidence Bias

Answer

Anchoring Bias

Answer

Halo Effect

Answer

Hindsight Bias

Question 18

Tendency to conform to the behavior or decisions of a group is termed as:

Accepted Answer

Social Proof

Answer

Confirmation Bias

Answer

Anchoring Bias

Answer

Overconfidence Bias

Question 19

Which of the following is NOT a recognized cognitive bias?

Accepted Answer

Rational Bias

Answer

Confirmation Bias

Answer

Anchoring Bias

Question 20

Confirmation bias is the tendency to:

Accepted Answer

Favor information that confirms pre-existing beliefs, while ignoring contradictory evidence.

Answer

Make decisions based on the first piece of information encountered.

Answer

Overestimate the likelihood of an event after it has occurred.

Question 21

Which of the following scenarios demonstrates anchoring bias?

Accepted Answer

A car salesperson suggests a high price, making a lower price seem more reasonable, even if it's still inflated.

Answer

A student avoids a certain topic because they had a bad experience with it in the past.

Answer

A person believes a coin flip is more likely to land on heads after a series of tails.

Question 22

Hindsight bias is the tendency to:

Accepted Answer

Believe that we could have predicted an event more accurately than we actually could have, after it has occurred.

Answer

Make quick decisions based on limited information.

Answer

Overemphasize the importance of personal effort in achieving a goal.

Question 23

Which of the following is a potential consequence of cognitive biases in economic decision-making?

Accepted Answer

Irrational investment decisions leading to market bubbles and crashes.

Answer

Improved economic growth and prosperity.

Answer

Increased efficiency in resource allocation.

Answer

Greater consumer satisfaction with products and services.

Question 24

By understanding cognitive biases, individuals can:

Accepted Answer

Improve their decision-making by recognizing and mitigating their own biases.

Answer

Become perfectly rational decision-makers.

Answer

Eliminate all uncertainty from their choices.

Answer

Predict future events with certainty.

Question 25

Which of the following is a strategy for mitigating the effects of cognitive biases?

Accepted Answer

Actively seeking out diverse perspectives and challenging one's own assumptions.

Answer

Relying solely on instinct and intuition.

Answer

Avoiding any decisions that require critical thinking.

Question 26

Behavioral economics primarily focuses on:

Accepted Answer

The interplay of psychological factors and cognitive biases on economic choices.

Answer

The analysis of financial markets and investment strategies.

Answer

The study of government policies and their impact on the economy.

Question 27

A key assumption of behavioral economics is that:

Accepted Answer

Human decision-making is often influenced by emotions, heuristics, and cognitive biases.

Answer

Markets are perfectly efficient and allocate resources optimally.

Answer

Individuals always act in their own best interests.

Question 28

How can cognitive biases influence economic outcomes?

Accepted Answer

By leading to irrational market behavior, bubbles, and financial instability.

Answer

By increasing consumer confidence and economic stability.

Answer

By promoting efficient allocation of resources and optimal economic growth.

Question 29

You are considering purchasing a new car. You discover one that you enjoy, but it is somewhat more costly than you anticipated. You persuade yourself that it is a wise investment because it offers additional features. Which cognitive bias could be at play here?

Accepted Answer

Sunk Cost Fallacy

Answer

Anchoring Bias

Answer

Framing Effect

Answer

Confirmation Bias

Question 30

A research study demonstrates that individuals are more likely to purchase a product if it is presented as '80% fat-free' rather than '20% fat'. What cognitive bias is exemplified by this finding?

Accepted Answer

Framing Effect

Answer

Endowment Effect

Answer

Loss Aversion

Answer

Availability Heuristic

Question 31

You witness a news report about a plane crash and subsequently resolve to avoid air travel, despite the fact that driving poses a statistically greater risk. Which cognitive bias is most likely responsible for this decision?

Accepted Answer

Availability Heuristic

Answer

Anchoring Bias

Answer

Confirmation Bias

Answer

Representativeness Heuristic

Question 32

You are offered a complimentary coffee with your purchase. Despite your lack of desire for coffee, you accept it because it is being offered without charge. Which cognitive bias explains this behavior?

Accepted Answer

Loss Aversion

Answer

Endowment Effect

Answer

Anchoring Bias

Answer

Framing Effect

Question 33

In an effort to lose weight, you have planned to follow a strict diet. However, after one lapse, you decide to abandon the diet altogether, reasoning that you have already 'ruined' it. Which cognitive bias is evident in this scenario?

Accepted Answer

Sunk Cost Fallacy

Answer

Availability Heuristic

Answer

Confirmation Bias

Answer

Anchoring Bias

Question 34

A salesperson presents you with a high-priced watch initially. They then display a less expensive watch, making it appear like a more desirable option in comparison. Which cognitive bias is being employed in this scenario?

Accepted Answer

Anchoring Bias

Answer

Endowment Effect

Answer

Framing Effect

Answer

Availability Heuristic

Question 35

When faced with two job offers, you focus solely on the positive aspects of your preferred option, disregarding any potential drawbacks. What cognitive bias is responsible for this selective attention?

Accepted Answer

Confirmation Bias

Answer

Representativeness Heuristic

Answer

Framing Effect

Answer

Availability Heuristic

Question 36

Upon meeting a highly talkative and outgoing individual, you conclude that they must also be friendly and trustworthy. Which cognitive bias underlies this assumption?

Accepted Answer

Representativeness Heuristic

Answer

Availability Heuristic

Answer

Anchoring Bias

Answer

Framing Effect

Question 37

You have the option of either accepting a guaranteed £50 or taking a gamble with a 50% chance of winning £100 or nothing. Despite the higher potential reward, you opt for the guaranteed £50. Which cognitive bias contributes to this risk-averse choice?

Accepted Answer

Risk Aversion

Answer

Loss Aversion

Answer

Anchoring Bias

Answer

Framing Effect

Question 38

Presented with the choice between a guaranteed gain of £100 or a 50% chance of winning £200 and a 50% chance of winning nothing, you select the guaranteed £100. Which cognitive bias is influencing this decision?

Accepted Answer

Risk Aversion

Answer

Availability Heuristic

Answer

Confirmation Bias

Answer

Framing Effect

Question 39

You believe that people from a certain country are more likely to be dishonest as a group, even though you have no evidence to support this. This is an example of:

Accepted Answer

Stereotyping

Answer

Confirmation bias

Answer

Anchoring bias

Question 40

You more easily recall recent news about natural disasters or plane crashes than positive news. This is an example of:

Accepted Answer

Availability heuristic

Answer

Confirmation bias

Answer

Sunk cost fallacy

Answer

Herd mentality

Question 41

A company continues to invest in a new project even though it is not performing well and there is evidence to suggest that it will not be successful. This is likely due to:

Accepted Answer

Sunk cost fallacy

Answer

Framing effect

Answer

Overconfidence bias

Answer

Anchoring bias

Question 42

You are offered a choice between two options: Option A – a 10% chance of winning $1000 and a 90% chance of winning nothing. Option B – a guaranteed win of $100. You choose Option B. This demonstrates:

Accepted Answer

Prospect theory

Answer

Cognitive dissonance

Answer

Confirmation bias

Answer

Endowment effect

Question 43

You are more likely to buy a product if it is presented as '90% fat-free' rather than '10% fat'. This is an example of:

Accepted Answer

Framing effect

Answer

Anchoring bias

Answer

Availability heuristic

Answer

Sunk cost fallacy

Question 44

You are more likely to purchase a product if it is recommended by a popular influencer or celebrity, even if you have no other information about the product. This is an example of:

Accepted Answer

Herd mentality

Answer

Confirmation bias

Answer

Endowment effect

Answer

Availability heuristic

Question 45

You believe that you are a better driver than the average person, even though there is no evidence to support this. This is an example of:

Accepted Answer

Overconfidence bias

Answer

Availability heuristic

Answer

Cognitive dissonance

Answer

Anchoring bias

Question 46

You are more likely to stay in a job that you dislike because you have already invested a lot of time and effort into it. This is likely due to:

Accepted Answer

Endowment effect

Answer

Overconfidence bias

Answer

Confirmation bias

Answer

Sunk cost fallacy

Question 47

You tend to search for and remember information that supports your existing beliefs and opinions. This is an example of:

Accepted Answer

Confirmation bias

Answer

Overconfidence bias

Answer

Framing effect

Answer

Availability heuristic