Behavioral Economics
Which bias says that people hate losing 10 dollars more than they love winning 10 dollars
Loss Aversion
This bias makes people follow the crowd instead of thinking for themselves
Herd Behavior / Herd mentality
When workers focus on one aspect of the task instead of doing everything by themselves, what is this called?
Specialization (Division of Labor)
The added satisfaction you gain from eating 1 more cookie is considered this:
Marginal Benefit
What is a stock?
A small piece of ownership in a publicly-traded company
A boomer refuses to give up his flip-phone because he is used to it and doesn't want to change. What is this an example of?
Status-Quo bias
Give 1 example of anchoring
Up to Mr. K's discretion
What is the main benefit of Specialization (Division of labor)
Increased efficiency -- can make more products in a quicker amount of time
The extra cost of making one more unit of something is called this:
Marginal cost
What does it mean to diversify your investments?
Investing in multiple companies across different sectors in order to try and balance out your wins and losses.
Give 1 example of the framing bias
Up to Mr. K's discretion
Believing you're a better driver than everyone else so you could never get into an accident is an example of:
Overconfidence Bias
What is it called when one person or country can produce more units of something than another person or country with the same amount of resources
Absolute Advantage
When should we stop production (or stop doing something)
When the marginal cost outweighs the marginal benefit
Out of these 5 options, which investment is the least risky and which investment is the most risky?
1: Index Funds 2: Mutual Funds 3: Individual Stocks 4: US Treasury Bonds 5: Savings Account
Least Risky: Savings account
Most Risky: Individual Stocks
A TV is on sale that says it normally costs 1,200 dollars, but is on sale for 999. Which bias is this an example of?
Anchoring
This bias makes someone believe their possessions are more valuable simply because they own it
Endowment effect
What is it called when one person or country can produce units of something while giving up less in the process (Lower opportunity cost)
Comparative Advantage
A factory can produce 100 shoes at a cost of $500. Producing 101 shoes costs $506 total. What is the marginal cost of the 101st shoe?
6 dollars
What is the S&P 500?
An index fund of the 500 most successful companies in the US
If an ad says "9 out of 10 doctors recommend this toothpaste" what is this an example of?
Framing Bias
You continue to stay in a toxic relationship because you've "Already been with them for so long" - what is this an example of?
Sunk-Cost fallacy
Which historical figure is credited with establishing the assembly line in 1913?
Henry Ford
List the 4 Pillars of Economics
Trade-offs, Incentives, Opportunity Cost, Marginal Analysis
What is the difference between dividends and capital gains?
Dividends - Percentages of a company's profits that gets paid to shareholders (typically quarterly/4x a year)
Capital Gains- Selling a stock at a higher price than you originally purchased it for.