6. Development Economics

Behavioral Economics — Quiz

Test your understanding of behavioral economics with 5 practice questions.

Practice Questions

Question 1

In a quasi-hyperbolic (β–δ) discounting model with β=0.6 and δ=0.9, what is the present value of receiving \$100 at times t=0,1,2?

Question 2

According to prospect theory with value function $v(x)=x^{0.5}\,(x\ge0)$ and loss multiplier 2, which option will a risk-averse individual choose? A 50% chance of \$100 or a sure \$30.

Question 3

For k=0.2 and t=5, compare hyperbolic discounting $D_{hyp}(t)=\frac{1}{1+kt}$ and exponential discounting $D_{exp}(t)=e^{-kt}$. What are the values?

Question 4

Which phenomenon describes an increase in individuals’ motivation to pursue goals following temporal landmarks (e.g., New Year’s Day)?

Question 5

Under the peak-end rule, how do people evaluate a past experience like a vacation?