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Two colleagues—Mathew and Peter—have successfully completed a project and their employer has decided to reward them but in a unique way. Each of them is taken to a separate room and asked to choose if the other colleague is a good teammate or a bad teammate. They are told that if both of them choose bad, they will not get any reward. If both of them choose good, they will get $5,000 each. If one chooses good while the other chooses bad, the one who chooses bad will get $10,000 and the one who chooses good will not get anything.
20) Refer to the scenario above. Which of the following is true?
A) This game does not have a dominant strategy equilibrium.
B) This game has a unique Nash equilibrium.
C) This game does not have a Nash equilibrium
D) Mathew's dominant strategy is to choose good.
21) Refer to the scenario above. In equilibrium, ________.
A) Mathew will choose good and Peter will choose bad
B) Peter will choose good and Mathew will choose bad
C) both Mathew and Peter will choose bad
D) both Mathew and Peter will choose good
22) Refer to the scenario above. If the players have to pay a fairness penalty of $7,000, ________.
A) this game will no longer have a Nash equilibrium
B) this game will have two Nash equilibria
C) Nash equilibrium will occur when Mathew chooses bad and Peter chooses good
D) Nash equilibrium will occur when Mathew chooses good and Peter chooses bad
Your economics teacher wants to test your understanding of game theory. She devises a simple game. You and your classmate are taken to two different rooms and asked to choose if the other is a friend or a foe. You are told that if both of you choose "friend," you will get $10 each. However, if both of you choose "foe," none of you will get anything. If one of you chose "friend" while the other chooses "foe," the one who chooses "foe" will get $20 while the one who chooses "friend" will get nothing.
23) Refer to the scenario above. Which of the following is true in this case?
A) This game does not have a dominant strategy equilibrium.
B) This game has a unique Nash equilibrium.
C) This game does not have a Nash equilibrium
D) Your dominant strategy is to choose "friend."
24) Refer to the scenario above. In equilibrium, ________.
A) you will choose "friend" and your classmate will choose "foe"
B) you will choose "foe" and your classmate will choose "friend"
C) both of you will choose "foe"
D) both of you will choose "friend"
25) Refer to the scenario above. If there is fairness penalty of $12, ________.
A) this game will no longer have a Nash equilibrium
B) this game will have two Nash equilibria
C) Nash equilibrium will occur when both of you choose "friend"
D) Nash equilibrium will occur when both of you choose "foe"
Jack and Jill are two siblings. Jack's father asked him how much he would offer to Jill if he gives him $50 as pocket money. He also told Jack that if Jill refuses the offer Jack makes, none of them will get any money.
26) Refer to the scenario above. This is an example of a(n) ________.
A) zero-sum game
B) symmetric game
C) ultimatum game
D) prisoners' dilemma
27) Refer to the scenario above. A player should use ________ to play this game.
A) forward induction
B) backward induction
C) mixed strategies
D) his dominated strategy
28) Refer to the scenario above. If Jill values fairness, ________.
A) she will not accept any offer made by Jack
B) Jack should make the lowest possible offer to Jill
C) she will accept the offer when Jack offers $25
D) Jack should not play the game
Robert and Alice are participating in a reality show on television. Robert is offered an amount of $500 and told that he can keep the money provided he shares some of it with Alice. Robert can offer Alice as much or as little as he likes, but if Alice rejects his offer, neither of them will get to keep any money.
29) Refer to the scenario above. This is an example of a(n) ________.
A) symmetric game
B) ultimatum game
C) prisoners' dilemma
D) zero-sum game
30) Refer to the scenario above. Robert should use ________ to play this game.
A) forward induction
B) backward induction
C) mixed strategies
D) his dominated strategy
31) Refer to the scenario above. If Alice values fairness, ________.
A) she will not accept any offer made by Robert
B) Robert should make the lowest possible offer to Alice
C) she will accept the offer when Robert offers $250
D) Robert should not play the game
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