Using Scenario 2 suppose Bill has eliminated one of the answers but is unsure of which of the remaining four answers are correct. Determine whether it is rational for Bill to guess
What will be an ideal response?
What we need to do is to compute the expected value of guessing and compare it to the expected value of leaving the question unanswered. The expected value of guessing if he has eliminated one answer is ¼ (9) + ¾ (-5) = 9/4 – 15/4 = -6/4 = -3/2 or -1.5 . Since this is less than the expected utility of skipping the question with a value of zero Bill should elect not to answer the question.
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Refer to Scenario 6.1. The Nash equilibrium occurs where
A) both Tasha and Gloria work extremely hard. B) both Tasha and Gloria work somewhat hard. C) Both A and B represent Nash equilibria. D) There is not a Nash equilibrium in this scenario.
There is a recessionary gap when
A. equilibrium GDP is equal to full employment GDP. B. equilibrium GDP is smaller than full employment GDP. C. equilibrium GDP is larger than full employment GDP. D. None of the choices are correct.
In the short run, tax cuts that are intended to increase aggregate supply have
a. almost no effect on aggregate demand, and a small effect on aggregate supply. b. about an equal effect on both aggregate demand and aggregate supply. c. a much greater effect on aggregate demand than on aggregate supply. d. almost no effect on aggregate supply, and a negative effect on aggregate demand.
When accounting profits are positive, economic profits
A. must be positive. B. will be negative. C. will equal zero. D. could be positive, negative or zero.