At the beginning of 2015, market analysts expect Atlantis Company, holder of a valuable patent, to earn the following stream of economic profits over the next five years. At the end of five years, Atlantis will lose its patent protection, and analysts expect economic profit to be zero after five years. 
If investors apply an annual risk-adjusted discount rate of 15%, the value of Atlantis Company in 2015 is $________, which is also the maximum price investors would be willing to pay for Atlantis Company.
A. $3,824,318
B. $1,275,000
C. $726,916
D. $2,215,000
E. $884,912
Answer: E
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Consider the game depicted below. Player 1 decides between going L or R in stage 1 and 3 of the game. Player 2 decides between going l and r in stage 2 of the game.
a. List the possible pure strategies for each player in this game and illustrate the payoffs from each pair of strategies in a matrix.
b. Is there a dominant strategy for either player?
c. Identify the subgame perfect equilibrium strategies and outcome. d. Identify the Nash Equilibria that are not subgame perfect. e. For each Nash Equilibrium that is not subgame perfect, explain which parts of the Nash Equilibrium strategies are non-credible. f. Suppose you have developed a drug that can be administered without the victim being aware of it. The effect of the drug is that the victim suddenly becomes gullible and believes anything he is told. You only have 1 dose of the drug and decide to auction it off to the two players right before they play each other in the game you have analyzed so far. Each player is asked to submit a sealed bid, and the highest bidder will be sold the drug at a price equal to the highest bid. In case of a tie in bids, a coin is flipped to determine who wins and pays the price that was bid. Suppose in this part that payoffs are in terms of dollars and that bids can be made in one cent increments. Suppose further that players do not consider bidding above the maximum they are willing to pay. Given that the players know each other's payoffs in the above game, what is the equilibrium price that you will be able to sell the drug for? (Hint: There are two possible answers.) g. In part (f), we said "Suppose further that players do not consider bidding above the maximum they are willing to pay." Can you think of a Nash equilibrium to the auction that would end in a price of $8 if we had not made that statement in (f)? What will be an ideal response?
The U.S. tariff on paper ____ the U.S. price of paper, _____ U.S. production of paper and _______the U.S. gains from trade
A. raises; increases; increases B. doesn't change; increases; increases C. doesn't change; doesn't change; decreases D. raises; increases; decreases
The aggregate expenditure model focuses on the short-run relationship between ________ and ________
A) unemployment; inflation B) planned inventories; unplanned inventories C) real spending; real GDP D) nominal spending; nominal GDP
In a typical cartel agreement, the cartel maximizes profit when it: a. behaves as a duopolist
b. is flexible in enforcing production targets. c. behaves as a monopolist. d. behaves as a perfectly competitive firm.