Consider the Following Scenario When Answering the Following Questions

question 134

Multiple Choice

Consider the following scenario when answering the following questions:
In 2000,researchers Brigitte Madrian and Dennis Shea analyzed the 401(k) savings behavior of employees in a large U.S.corporation before and after an interesting change in the company 401(k) plan.
Before the plan change,employees were not automatically enrolled as participants in the company 401(k) plan upon being hired and were required to complete paperwork if they wanted to opt in.After the plan change,new employees were automatically enrolled in the 401(k) plan and were required to complete paperwork if they wanted to opt out.The amount of time and effort required to either opt in or opt out was approximately equal.None of the economic features of the plan changed.
-The researchers found that 401(k) participation is significantly higher under automatic enrollment.One possible explanation for this finding is that

• A) there was a large shift in the employees' preferences for savings the day plan changes were implemented.
• B) framing effects have no influence in employee 401(k)participation decisions.
• C) framing effects have a significant influence in employee 401(k)participation decisions.
• D) employees will always choose whether to participate based entirely on the economic features of the plan,not the way the decision to participate is framed.
• E) employees are acting rationally in the context of standard economic models.

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Definitions:

Elasticity of Demand

A measure of how sensitively the quantity demanded of a good responds to changes in other economic factors, such as price or consumer income.

Collusive Agreement

A secret or illegal cooperation or agreement between parties to limit competition and manipulate market conditions to their advantage.

Cartel

An association of independent businesses or countries that work together to control prices and limit competition in a specific market.

Collusion

An agreement between two or more parties, often covertly, to limit competition and manipulate markets for mutual benefit.