Financial Markets Lesson 7 Quiz Answer
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#Financial market
#Finance
#Yale University
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Week-2
Lesson #7 Quiz
Q1) Which of the following best describes the “invisible hand”?
- Subtle government economic interventions can lead to the inefficient allocation of resources.
- The free market, guided by self-interest, is mislead to inefficiently allocate resources.
- Subtle government economic interventions can ensure the sufficient production of goods to meet society’s demands.
- The free market, guided by self-interest, ensures the sufficient production of goods to meet society’s demands.
Q2) What problems does prospect theory solve? (check all that apply)
- People can underestimate high probabilities and overestimate low probabilities
- People do not treat gambles as equivalent to their expected utility
- People will make big gambles to avoid losses
- People will often make purchases impulsively
Q3) What is the wishful thinking bias?
- People over-estimate probabilities of things they would like to be true.
- People do not consider the probability of the things they want most.
- People hope that their sports team or political candidate will win
- People think that, if they hope for something strongly enough, it will be more likely to happen.
Q4) Ricardo thinks that, since society seems similar to what it was in the late 1920s, a second Great Depression is coming soon. To which cognitive bias is Ricardo falling victim?
- Representativeness heuristic
- The framing effect
- The disjunction effect
- Attention anomalies
Q5) What is Newcomb’s paradox?
- People behave irrationally when faced with decisions which involve large sums of money.
- People will behave differently if playing games against a computer compared to playing them with a human opponent.
- People prefer a small chance at winning $1 million than a high chance of winning $1000.
- People sometimes change their behavior when they learn about a prediction which has been made about the future.
Q6) Which of the following is NOT a common trait of somebody with Antisocial Personality Disorder?
- Lack of empathy
- Manipulative
- Lack of desire to interact with others
- Heightened self-esteem
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