Consumer Perception and Product Packaging Quiz

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What is one of the key reasons why behavioral finance is important?

To ignore the value of a diversified portfolio
To blindly follow market trends
To maximize capital and make smarter financial choices (correct)
To always panic over market fluctuations

What is a core principle emphasized by behavioral finance in relation to emotions and investing?

Maximize emotional reactions for better decision-making
Control emotions to prevent panic over market fluctuations (correct)
Panic over little changes in the market
Ignore emotions completely when making financial decisions

In which branch of behavioral finance are irrational investors compared to rational investors?

Micro Behavioural Finance (correct)
Efficient Market Hypothesis
Traditional Finance
Macro Behavioural Finance

Which finance branch deals with the drawbacks of the Efficient Market Hypothesis?

Macro Behavioural Finance (D) Signup and view all the answers

What does standard finance assume about an investor's decision-making process?

Investors always make rational decisions (B) Signup and view all the answers

Why is it important for investors to ask the right questions according to behavioral finance?

To make more informed decisions (A) Signup and view all the answers

What is the purpose of the jar system mentioned in the text?

To teach young people how to manage money and allocate funds (B) Signup and view all the answers

Which bias leads to overestimating the importance or likelihood of something based on its ease of recall?

Availability bias (D) Signup and view all the answers

What causes availability bias according to the text?

Retrievability (A) Signup and view all the answers

What does loss aversion state?

Losses have a greater psychological and emotional impact than gains (B) Signup and view all the answers

Which heuristic involves evaluating situations relative to one's own likes, dislikes, or circumstances?

Resonance heuristic (D) Signup and view all the answers

How does the jar system help individuals stay within budget?

By guiding expense allocation based on values (D) Signup and view all the answers

What is one of the main principles of behavioral finance?

Investors are treated as irrational (A) Signup and view all the answers

What is a key aspect that behavioral finance aims to analyze and understand?

Herding effects (C) Signup and view all the answers

Which fields is behavioral finance built upon?

Psychology, Sociology, and Finance (D) Signup and view all the answers

What is one of the objectives of studying behavioral finance regarding investors?

To study risk tolerance capacity and investment patterns (A) Signup and view all the answers

How does behavioral finance view the cognitive abilities of investors?

Investors are prone to cognitive errors affecting decisions (B) Signup and view all the answers

What is one of the aims of behavioral finance?

Mitigating the effects of irrational behavior (C) Signup and view all the answers

What is the anchoring and adjustment heuristic?

Starting with a target number and adjusting beliefs based on it (B) Signup and view all the answers

What do consumers tend to associate quality products with?

External packaging (C) Signup and view all the answers

Who first hypothesized the anchoring and adjustment heuristic?

Daniel Kahneman and Amos Tversky (A) Signup and view all the answers

How do consumers correlate the quality of generic products with branded products according to the text?

By comparing external packaging (A) Signup and view all the answers

What approach does the anchoring and adjustment heuristic describe?

Starting with a target number and adjusting from there (B) Signup and view all the answers

In what way does the anchoring and adjustment heuristic differ from consumer behavior related to packaging?

Anchoring starts with adjusting beliefs, while packaging starts with evaluating quality (B) Signup and view all the answers

What phenomenon is described as the tendency to feel greater pain for a loss than pleasure for a gain of equal value?

Prospect Theory (B) Signup and view all the answers

Which term best describes the human tendency to overestimate one's abilities and talent?

Overconfidence Bias (D) Signup and view all the answers

Loss aversion in decision making implies that individuals:

Prefer avoiding losses more than acquiring equivalent gains (C) Signup and view all the answers

What is the main characteristic of overconfidence bias?

Overestimating one's abilities (C) Signup and view all the answers

The term 'Invulnerability to risk' in human behavior refers to:

A belief that one is not susceptible to risks (D) Signup and view all the answers

Which theory explains the asymmetry between how people value gains and losses?

Prospect Theory (A) Signup and view all the answers