Events & Promotions
|
|
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.
Customized
for You
Track
Your Progress
Practice
Pays
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
May 0510:00 AM PDT
-11:00 AM PDT
GMAT Inequalities is a high-frequency topic in GMAT Quant, but many students struggle because the concepts behave differently from standard algebra. Understanding the right rules, patterns, and edge cases can significantly improve both speed and accuracy.- May 06
08:30 AM PDT
-09:30 AM PDT
In Episode 3 of our GMAT Ninja Critical Reasoning series, we tackle Discrepancy, Paradox, and Explain an Oddity questions. You know the feeling: the passage gives you two facts that seem completely contradictory.... - May 08
08:00 AM PDT
-08:30 AM PDT
Join the special YouTube live-stream for selecting the winners of GMAT Club MBA Scholarships sponsored by Juno live. Watch who gets these coveted MBA scholarships offered by GMAT Club and Juno.
11 Oct 2025, 20:41
Kudos
Bookmarks
Traditional economic theory has long rested on the assumption of rational decision-making: that individuals, given complete information and consistent preferences, choose options that maximize their utility. Yet research in behavioral economics, notably advanced by psychologists Daniel Kahneman and Amos Tversky, revealed that individuals systematically deviate from rationality through cognitive biases such as overconfidence, loss aversion, and framing effects. The latter refers to the tendency for different presentations of the same information, such as describing a medical treatment in terms of survival rates rather than mortality rates to produce markedly different choices. These insights challenged the descriptive validity of the “rational actor” model that underpinned much of neoclassical economics.
Building on this work, economist Richard Thaler and legal scholar Cass Sunstein introduced the concept of a nudge- a subtle alteration in the context in which choices are presented, designed to steer individuals toward better decisions without restricting their freedom of choice. Examples include setting healthier food as the default option in cafeterias or automatically enrolling employees in retirement savings plans unless they opt out. Such interventions, sometimes called libertarian paternalism, aim to improve welfare while preserving autonomy.
Critics, however, argue that nudges risk paternalistic overreach and may underestimate individuals’ capacity for self-correction. Others question their long-term effectiveness, suggesting that behavioral interventions may lose potency once individuals recognize the underlying manipulation. Nonetheless, the “nudge” approach has profoundly influenced public policy, signaling a shift from viewing humans as perfectly rational agents to understanding them as predictably imperfect decision-makers operating within structured environments.
Which of the following best describes the author’s attitude toward the 'nudge' approach as presented in the passage?
A. Supportive, portraying nudges as an acceptable replacement for rational-choice theory.
B. Cautiously favorable, acknowledging their usefulness while recognizing some criticisms.
C. Even-handed, offering description only and avoiding evaluative language.
D. Assertive, emphasizing the ethical and practical problems that the approach presents.
E. Largely enthusiastic, stressing the approach’s innovative success and broad policy benefits.
Building on this work, economist Richard Thaler and legal scholar Cass Sunstein introduced the concept of a nudge- a subtle alteration in the context in which choices are presented, designed to steer individuals toward better decisions without restricting their freedom of choice. Examples include setting healthier food as the default option in cafeterias or automatically enrolling employees in retirement savings plans unless they opt out. Such interventions, sometimes called libertarian paternalism, aim to improve welfare while preserving autonomy.
Critics, however, argue that nudges risk paternalistic overreach and may underestimate individuals’ capacity for self-correction. Others question their long-term effectiveness, suggesting that behavioral interventions may lose potency once individuals recognize the underlying manipulation. Nonetheless, the “nudge” approach has profoundly influenced public policy, signaling a shift from viewing humans as perfectly rational agents to understanding them as predictably imperfect decision-makers operating within structured environments.
Which of the following best describes the author’s attitude toward the 'nudge' approach as presented in the passage?
A. Supportive, portraying nudges as an acceptable replacement for rational-choice theory.
B. Cautiously favorable, acknowledging their usefulness while recognizing some criticisms.
C. Even-handed, offering description only and avoiding evaluative language.
D. Assertive, emphasizing the ethical and practical problems that the approach presents.
E. Largely enthusiastic, stressing the approach’s innovative success and broad policy benefits.
11 Oct 2025, 20:41
Kudos
Bookmarks
Official Solution:
Traditional economic theory has long rested on the assumption of rational decision-making: that individuals, given complete information and consistent preferences, choose options that maximize their utility. Yet research in behavioral economics, notably advanced by psychologists Daniel Kahneman and Amos Tversky, revealed that individuals systematically deviate from rationality through cognitive biases such as overconfidence, loss aversion, and framing effects. The latter refers to the tendency for different presentations of the same information, such as describing a medical treatment in terms of survival rates rather than mortality rates to produce markedly different choices. These insights challenged the descriptive validity of the “rational actor” model that underpinned much of neoclassical economics.
Building on this work, economist Richard Thaler and legal scholar Cass Sunstein introduced the concept of a nudge- a subtle alteration in the context in which choices are presented, designed to steer individuals toward better decisions without restricting their freedom of choice. Examples include setting healthier food as the default option in cafeterias or automatically enrolling employees in retirement savings plans unless they opt out. Such interventions, sometimes called libertarian paternalism, aim to improve welfare while preserving autonomy.
Critics, however, argue that nudges risk paternalistic overreach and may underestimate individuals’ capacity for self-correction. Others question their long-term effectiveness, suggesting that behavioral interventions may lose potency once individuals recognize the underlying manipulation. Nonetheless, the “nudge” approach has profoundly influenced public policy, signaling a shift from viewing humans as perfectly rational agents to understanding them as predictably imperfect decision-makers operating within structured environments.
Which of the following best describes the author’s attitude toward the 'nudge' approach as presented in the passage?
A. Supportive, portraying nudges as an acceptable replacement for rational-choice theory.
B. Cautiously favorable, acknowledging their usefulness while recognizing some criticisms.
C. Even-handed, offering description only and avoiding evaluative language.
D. Assertive, emphasizing the ethical and practical problems that the approach presents.
E. Largely enthusiastic, stressing the approach’s innovative success and broad policy benefits.
A) Incorrect. The passage does not suggest that nudges should replace rational-choice theory. Instead, it says nudges “signal a shift” toward seeing people as “predictably imperfect.” That wording acknowledges a new perspective but stops short of declaring nudges the sole or dominant framework.
B) Correct. The author describes nudges as welfare-improving and autonomy-preserving, language that signals approval. Immediately afterward, however, the text concedes that critics worry about “paternalistic overreach” and waning effectiveness. This mix of benefits and caveats reflects a cautiously favorable stance.
C) Incorrect. An even-handed description would avoid value-laden terms, yet the author labels nudges “profoundly influential” and highlights their aim to “improve welfare,” both mildly positive evaluations. The passage is descriptive, but not strictly neutral.
D) Incorrect. Although objections are noted, the tone is not primarily critical. Ethical and practical concerns receive a brief paragraph, but the overall framing emphasizes the approach’s policy impact and potential to steer “better decisions,” which contradicts an assertively negative attitude.
E) Incorrect. The author does not sound “largely enthusiastic.” Positive words are balanced by explicit criticisms about paternalism and durability. A truly enthusiastic tone would downplay or omit those drawbacks.
Answer: B
Traditional economic theory has long rested on the assumption of rational decision-making: that individuals, given complete information and consistent preferences, choose options that maximize their utility. Yet research in behavioral economics, notably advanced by psychologists Daniel Kahneman and Amos Tversky, revealed that individuals systematically deviate from rationality through cognitive biases such as overconfidence, loss aversion, and framing effects. The latter refers to the tendency for different presentations of the same information, such as describing a medical treatment in terms of survival rates rather than mortality rates to produce markedly different choices. These insights challenged the descriptive validity of the “rational actor” model that underpinned much of neoclassical economics.
Building on this work, economist Richard Thaler and legal scholar Cass Sunstein introduced the concept of a nudge- a subtle alteration in the context in which choices are presented, designed to steer individuals toward better decisions without restricting their freedom of choice. Examples include setting healthier food as the default option in cafeterias or automatically enrolling employees in retirement savings plans unless they opt out. Such interventions, sometimes called libertarian paternalism, aim to improve welfare while preserving autonomy.
Critics, however, argue that nudges risk paternalistic overreach and may underestimate individuals’ capacity for self-correction. Others question their long-term effectiveness, suggesting that behavioral interventions may lose potency once individuals recognize the underlying manipulation. Nonetheless, the “nudge” approach has profoundly influenced public policy, signaling a shift from viewing humans as perfectly rational agents to understanding them as predictably imperfect decision-makers operating within structured environments.
Which of the following best describes the author’s attitude toward the 'nudge' approach as presented in the passage?
A. Supportive, portraying nudges as an acceptable replacement for rational-choice theory.
B. Cautiously favorable, acknowledging their usefulness while recognizing some criticisms.
C. Even-handed, offering description only and avoiding evaluative language.
D. Assertive, emphasizing the ethical and practical problems that the approach presents.
E. Largely enthusiastic, stressing the approach’s innovative success and broad policy benefits.
A) Incorrect. The passage does not suggest that nudges should replace rational-choice theory. Instead, it says nudges “signal a shift” toward seeing people as “predictably imperfect.” That wording acknowledges a new perspective but stops short of declaring nudges the sole or dominant framework.
B) Correct. The author describes nudges as welfare-improving and autonomy-preserving, language that signals approval. Immediately afterward, however, the text concedes that critics worry about “paternalistic overreach” and waning effectiveness. This mix of benefits and caveats reflects a cautiously favorable stance.
C) Incorrect. An even-handed description would avoid value-laden terms, yet the author labels nudges “profoundly influential” and highlights their aim to “improve welfare,” both mildly positive evaluations. The passage is descriptive, but not strictly neutral.
D) Incorrect. Although objections are noted, the tone is not primarily critical. Ethical and practical concerns receive a brief paragraph, but the overall framing emphasizes the approach’s policy impact and potential to steer “better decisions,” which contradicts an assertively negative attitude.
E) Incorrect. The author does not sound “largely enthusiastic.” Positive words are balanced by explicit criticisms about paternalism and durability. A truly enthusiastic tone would downplay or omit those drawbacks.
Answer: B
