Refer to the figure below. What is the Nash equilibrium of this game? 
A. A chooses Up, B chooses Right
B. A chooses Up, B chooses Left
C. A chooses Down, B chooses Left
D. A chooses Down, B chooses Right
Answer: B
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Answer the following statement(s) true (T) or false (F)
1. In the principal-agent problem, assigning full liability to the agent gives no incentive for the principal to avoid damages. 2. Transaction costs arise when property rights are nonexistent. 3. If all parties can enter into negotiations, social optimum is achieved with or without a Pigou tax. 4. A free-rider problem occurs when people can share in the benefits of an activity without being forced to contribute to its costs. 5. Court decision involving torts are irrelevant to social welfare.
Making a loan is generally:
A. less risky and less potentially rewarding than buying stock. B. less risky and more potentially rewarding than buying stock. C. more risky and less potentially rewarding than buying stock. D. more risky and more potentially rewarding than buying stock.
If you borrow money at a 9% nominal rate and the inflation rate is 2%, what is the real interest rate on the loan?
a. 9.0% b. 11.0% c. 7.0% d. 2.0% e. 4.5%
If MUx/Px exceeds MUy/Py, then a household can increase its utility by spending more on Y and less on X.
Answer the following statement true (T) or false (F)