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This test consists of 5 multiple choice questions, 5 short answer questions, and 10 short essay questions.

Multiple Choice Questions

1. What method is referred to by the author with the acronym DRM?
(a) Detrimental Reliance Method.
(b) Day Reconstruction Method.
(c) Dream Revival Method.
(d) Diagnostic Reconstruction Method.

2. What term refers to the quality of being noticeable or important?
(a) Endowment.
(b) Heuristic.
(c) Salience.
(d) Articulate.

3. What is the conclusion of the paper "Trading is Hazardous to Your Health"?
(a) The speed of which trading correlates directly with loss aversion.
(b) Both active traders and inactive traders earned similar returns.
(c) The most active traders earned the highest returns while the least active traders earned low returns.
(d) The most active traders had the poorest results while the least active traders earned the highest returns.

4. What term does the author apply to the idea that once you have accepted a theory and used it as a tool in your thinking, it is extremely difficult to notice its flaws?
(a) Theory-induced blindness.
(b) The availability cascade.
(c) Narrative fallacy.
(d) An anchoring effect.

5. Who was the director of the CIA when intelligence learned that al-Qaeda may be planning a major attack on the U.S.?
(a) George Tenet.
(b) Malcolm Gladwell.
(c) Christopher Chabris.
(d) Baruch Fischhoff.

Short Answer Questions

1. What term refers to elementary rules, or statements regarded as established?

2. Whose study on duration neglect and the peak-end rule involved a story of Jen, who died instantly in an automobile accident?

3. Who introduced the term "affective forecasting"?

4. How many bus bombings occurred in Israel between December 2001 and September 2004?

5. In discussing vacations, the author presents the assertion that resorts offer what?

Short Essay Questions

1. What is the expected utility hypothesis?

2. What is the initial gamble that Paul Samuelson famously asked a friend?

3. What is hindsight bias?

4. What is broad framing? What is narrow framing?

5. Wht is duration neglect?

6. Why does Kahneman cite the book Expert Political Judgment: How Good Is It? Who wrote this book?

7. How does the author describe regret in economics?

8. What is the principle of diminishing sensitivity?

9. What evidence was presented by Ed Diener and his team when examining vacations?

10. How do prospect theory and utility theory differ?

(see the answer keys)

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