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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. Who wrote that "chances of rare events (such as the burst of housing bubbles) receive less impact than they deserve according to their objective probabilities" (639)?
(a) John Gottman.
(b) Jim Collins and Jerry I. Porras.
(c) Craig Fox.
(d) Ralph Hertwig and Ido Erev.

2. In Chapter 31, the author posits that the main motivators of money-seeking individuals (aside for the very poor) are what?
(a) Support and protection.
(b) Power and greed.
(c) Self-regard and achievement.
(d) Earning more money.

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

4. How are decision weights and probabilities regarded in prospect theory?
(a) Probabilities are more important.
(b) Variations of probability have less effect on decision weights.
(c) Weights are more important.
(d) The same.

5. In what year does the author describe visiting a Wall Street firm with Amost Tversky and Richard Thaler?
(a) 1965.
(b) 1984.
(c) 1975.
(d) 1999.

Short Answer Questions

1. The author notes in Chapter 36 that "Caring for people often takes the form of concern for the quality of their stories, not for" what (744)?

2. According to the author in Chapter 26, "In bad choices, where a sure loss is compared to a larger loss that is merely probable," what is the result (552)?

3. Who was the Nobel Prize-winning economist that proposed a theory where utility are attached to changes of wealth rather than to states of wealth?

4. What term refers to the state that some artists experience in creative moments and other experience through films, books, etc.?

5. In the following example from Chapter 30, the author posits the following in regards to a person choosing a marble from an urn. The red marbles win a prize. "Urn A contains 10 marbles, of which 1 is red. Urn B contains 100 marbles, of which 8 are red" (631). What are the chances of winning in Urn B?

Short Essay Questions

1. What are the three qualifications when deciding whether or not to accept a small risk with positive expected value?

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

3. How did Nassim Taleb define the term narrative fallacy in The Black Swan?

4. What is the principle of loss aversion?

5. What is a framing effect?

6. Why was Kahneman astonished upon reading an essay by Bruno Frey?

7. What is broad framing? What is narrow framing?

8. How does the author assert terrorism works in Chapter 30?

9. How does the author describe regret in economics?

10. Why does the author credit Virginia Apgar with saving the lives of many infants?

(see the answer keys)

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