Tracy and Amy are playing a game in which Tracy has the first move at X in the decision tree shown below. Once Tracy has chosen either the top or bottom branch at X, Amy, who can see what Tracy has chosen, must choose the top or bottom branch at Y or Z. Both players know the payoffs at the end of each branch.
In the equilibrium of this game:
A. Tracy gets 300 and Amy gets 200.
B. Tracy gets 25 and Amy gets 225.
C. Tracy gets 75 and Amy gets 150.
D. Tracy and Amy both get 125.
Answer: C
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Redding Railroad is held liable by the courts for damages to crops growing along its lines caused by sparks flying off when trains pass. The court ordered damage assessment is $100 per adjoining acre though profits per acre are less than this. Currently, about half of the line has adjoining planted farmlands, the other half is not yet developed. As a result
a. farmers are likely to reduce the number of acres they plant. b. farmers are likely to increase the number of acres they plant in order to collect the payment. c. the railroad will increase the number of trains running. d. farmers will accept payments from the railroad equal to lost profits not to plant.
If the government grants tax credits to first-time homebuyers, the supply of houses would increase and the price of housing would fall.
Answer the following statement true (T) or false (F)
IBM undertook a massive restructuring program to decentralize into six smaller decision-making groups in order to reduce economies of scale
a. True b. False
Economic models typically assume that decision makers face constraints because of scarce resources
a. True b. False