Coursera | Financial Markets

Lesson #7 Quiz >> Financial Markets

Lesson #7 Quiz >> Financial Markets

1. 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.

2. 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

3. What is the wishful thinking bias?

  • People think that, if they hope for something strongly enough, it will be more likely to happen.
  • 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

4. 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

5. 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 sometimes change their behavior when they learn about a prediction which has been made about the future.
  • People prefer a small chance at winning $1 million than a high chance of winning $1000.

6. Which of the following is NOT a common trait of somebody with Antisocial Personality Disorder?

  • Lack of empathy
  • Lack of desire to interact with others
  • Manipulative
  • Heightened self-esteem

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