Behaviors of People That Contradict the Traditional Economic Framework Question (Need a Little Help)?

Question

Behavioral economists believe that people do not always act the way the traditional economic framework suggests they should. Which of the following examples illustrate this?

I. Some people treat $100 they earn differently from $100 they win in a random drawing.

II. Some people value their own possessions more highly than things they don't have, even if the dollar value is the same (the "endowment effect").

III. Some people would be willing to pay money to lower the incomes of others.

IV. Some people would be willing to make a large sacrifice in order to help a loved one.

A. I and IV only

B. II, III, and IV only

C. I, II, and III only

D. I, II, III, and IV

I know that I, II, III are correct - so that leaves choices C and D. Would you consider IV part of the answer too? Because naturally spending money on a loved one (for their need) is expected of someone...what does everyone think?

Answer 1

If I spend money on someone I love, I receive value in return. That value may be an expectation of reciprocity. It may simply be a feeling of satisfaction. It may be avoidance of appearing uncaring to others. But it's still value, and it's what economists would expect to happen.

Answer 2

I would guess C.

Answer 3

Actually, I think the answer is D.  Although the "caring" is value, it is not value in the economic sense where value is only expressed in terms of goods and services.  There is "psychic" value, but this is not a classical economics concept.