Suppose Gina and Henry play two rnds of the ultimatum game. In the first round they play for $10; in the second round they play for $1,000. In the first round Gina suggests an 80/20 split ($8 to Gina, $2 to Henry), but Henry quickly rejects the offer as
unfair. Assuming Gina is interested in gaining financially from the experience and that she understands behavioral economics, we would expect her to:
A. offer the same relative split ($800/$200), knowing that Henry will accept the offer because
the dollar amount he would forgo by rejecting it is substantial.
B. offer a more unequal split ($900/$100) in order to gain more for herself and figuring Henry
will accept the split because $100 is better than nothing.
C. offer a more equal split ($700/$300) to increase the probability that Henry will accept the
offer.
D. offer Henry more than half of the pot to ensure acceptance of the offer.
Answer: C
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A) Figures A and C B) Figures B and D C) Figure A only D) Figure C only
When a firm leaves a perfectly competitive industry,
a. the individual demand curves facing remaining firms shift towards the point of minimum average cost in the long run. b. short-run industry equilibrium is re-established at a new point along the original short-run industry supply curve. c. the short-run industry supply curve shifts to the right. d. at the new long-run equilibrium, the remaining firms in the industry will each receive a higher profit.
Given the production possibility tables for First and Second Bakeries shown, we know that the opportunity cost of producing pies:First BakerySecond BakeryCookiesPiesCookiesPies018091012306206603300900
A. is higher at Second Bakery. B. is the same at both bakeries. C. is higher at First Bakery. D. cannot be computed without further information.
If M stands for the money stock, P for the price level, and Y for real GDP, then velocity, V, equals:
A. (M × P)/ Y. B. (P × Y)/M. C. (M × Y)/ P. D. (P × M)/ Y.