Player 1 and Player 2 are playing a game in which Player 1 has the first move at A in the decision tree shown below. Once Player 1 has chosen either Up or Down, Player 2, who can see what Player 1 has chosen, must choose Up or Down at B or C. Both players know the payoffs at the end of each branch. 
Suppose Player 1 and Player 2 enter into a binding agreement in which Player 1 agrees to pay Player 2 a fixed amount of money to get Player 2 to play Up when it is Player 2's turn. How much will Player 1 have to pay Player 2 to get Player 2 to play Up?
A. $0
B. at least $10.
C. at least $50.
D. at least $20.
Answer: D
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The amount by which consumption increases when disposable income increases by $1 is called:
A. the consumption function. B. autonomous expenditure. C. an automatic stabilizer. D. the marginal propensity to consume.
Juan purchases automobile insurance; the insurance contract is a:
A. financial instrument. B. financial intermediary. C. transfer of risk from the insurance company to Juan. D. form of money.
Refer to Figure 17-2. Suppose the Fed used expansionary policy to push short-run equilibrium to point B. If the short-run equilibrium remained at point B long enough,
A) the economy would move back to point A. B) the short-run Phillips curve would shift down. C) the economy would stay at point B in the long run. D) the short-run Phillips curve would shift up.
Why are decision trees useful to managers who plan business strategies?
A) Decision trees can be used to increase the amount of product differentiation; this enables managers to charge higher prices for their products. B) Decision trees provide a systematic way of thinking through the implications of a strategy. C) Using a decision tree always leads to a dominant strategy. D) Decision trees explain the level of concentration in an industry.