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1What is the 'anchoring effect'?
- AThe tendency to rely too heavily on the first piece of information encounteredCorrect
- BThe tendency to anchor decisions to emotional outcomes
- CThe tendency to seek information that confirms existing beliefs
- DThe tendency to overestimate the likelihood of memorable events
Why: Anchoring describes judgments being pulled toward an initially presented value or reference point, even when that starting information is incomplete or arbitrary. The size and reliability of the effect depend on the task and context, so the concept is a research finding rather than a claim that the first number always controls a decision.
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2Which bias causes people to continue investing in a failing project because of past investment?
- AOptimism bias
- BSunk cost fallacyCorrect
- CAvailability heuristic
- DDunning-Kruger effect
Why: A sunk cost is a past expenditure of time, money, or effort that cannot be recovered. Treating that past expenditure as a reason to continue can distort the current comparison; the relevant analysis considers future costs, benefits, risks, obligations, and switching consequences.
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3What does 'confirmation bias' describe?
- AThe tendency to remember information that confirms a prior belief
- BThe tendency to seek, interpret, and recall information that confirms one's preexisting beliefsCorrect
- CThe tendency to confirm decisions with a trusted advisor
- DThe tendency to agree with authority figures
Why: Confirmation bias is an umbrella term for favoring information that supports an existing belief during search, interpretation, or memory. A useful process check is to ask what evidence would count against the preferred conclusion and whether credible alternatives received comparable scrutiny; this reduces one opportunity for biased evaluation but cannot guarantee neutrality.
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4The 'availability heuristic' leads people to judge the likelihood of events based on:
- AStatistical base rates
- BExpert opinion
- CHow easily examples come to mindCorrect
- DThe number of times they have personally experienced the event
Why: The availability heuristic describes estimating frequency or likelihood partly from how readily examples can be recalled. Vivid, recent, or heavily publicized events may therefore receive more weight than base-rate evidence warrants, although easy recall is not always misleading.
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5What did the original 1999 research associated with the Dunning–Kruger effect examine?
- AWhether low performers in specific tested domains misjudged their relative performanceCorrect
- BWhether every beginner believes they are an expert
- CWhether experts always underestimate themselves
- DWhether confidence is a fixed personality trait
Why: Kruger and Dunning studied participants' test performance and estimates of their performance in specific domains including humor, grammar, and logic. Lower-performing groups substantially overestimated their percentile standing in those studies. The popular claim that all inexperienced people think they are experts is broader than the original evidence, and later researchers have debated how measurement and statistical effects contribute to the pattern.
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6What is 'hindsight bias'?
- AThe tendency to make better decisions after reflecting on the past
- BThe tendency to see past events as having been more predictable than they actually wereCorrect
- CThe tendency to forget past mistakes
- DThe tendency to focus only on recent events
Why: Hindsight bias — often called the 'I-knew-it-all-along' effect — is the tendency to perceive past events as having been more predictable than they really were. Once an outcome is known, people overestimate how obvious it was beforehand. This can distort learning (we think we already 'knew' it) and lead us to judge others' decisions unfairly when those decisions were actually made under genuine uncertainty.
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7What does 'loss aversion' describe?
- AThe tendency to avoid all forms of financial risk
- BThe tendency for losses to feel psychologically more painful than equivalent gains feel goodCorrect
- CThe tendency to lose interest in long-term goals
- DThe tendency to avoid making any decision at all
Why: In prospect-theory research, outcomes can be evaluated relative to a reference point, with losses sometimes weighted more heavily than comparable gains. The strength of loss aversion is not a universal two-to-one psychological constant; it varies with context, stakes, measurement, and the kind of choice being studied.
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8What is the 'framing effect'?
- AJudging a person mainly by their physical appearance
- BReaching different conclusions depending on how the same information is presentedCorrect
- CBlaming external circumstances for your own mistakes
- DRemembering the first and last items in a list best
Why: A framing effect occurs when equivalent descriptions of a decision produce different preferences. Tversky and Kahneman demonstrated preference shifts between gain and loss formulations. Rewriting quantities in equivalent terms is a useful consistency check, although not every wording change is logically equivalent or produces an effect.
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9What is the 'halo effect'?
- AThe tendency to believe attractive or likeable people are also competent, kind, or trustworthyCorrect
- BThe tendency to feel good after helping others
- CThe tendency to overvalue brand-new products
- DThe tendency to remember positive experiences more than negative ones
Why: The halo effect describes an overall positive or negative impression influencing judgments about separate traits without enough trait-specific evidence. In evaluation settings, defining criteria and judging each relevant dimension separately can make the basis of a decision more visible, though structure does not remove every source of bias.
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10What is 'survivorship bias'?
- AFocusing only on the survivors or successes while ignoring those that failed and are no longer visibleCorrect
- BThe belief that you will live longer than statistics suggest
- CPreferring older, proven products over new ones
- DThe tendency to take fewer risks as you age
Why: Survivorship bias is a form of selection bias: analysis focuses on cases that remained observable after a selection process while excluded, failed, or missing cases are overlooked. Conclusions about success rates or causes can then be distorted because the observed group is not the full group that originally faced the process.
