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midterm 1 practice1

# midterm 1 practice1 - ECON 398 Fall 2006 Midterm 1 Practice...

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ECON 398 Fall 2006 Midterm 1 Practice Exam 1 Professor Ozdenoren INSTRUCTIONS You have 80 minutes to complete the exam. There are 16 questions.

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1. Consider the following simultaneous game, which has a variable x for two of the payoffs. High Low High 2,4 3, x Low x , 5 4, 4 For what values of x is there exactly one pure-strategy equilibrium? (a) Only for x > 2. (b) Only for x < 2 (c) Only for x > 4 (d) For all x not equal to 2. (e) There are only mixed strategy equilibria for this game. 2. Tutoring 401. There are two 401 tutors in the whole economics department— Emma and Martin. They sell tutoring as a flat rate for the semester, and demand is measured in number of hours per semester. Demand for Emma = 100 – (Emma’s Price) + 2/3 (Martin’s price) and: Demand for Martin = 100 – (Martin’s Price) + 2/3 (Emma’s price) Cost to either tutor of an hour of tutoring is \$10. They are both profit-maximizing. In Nash equilibrium, what price will Martin charge? 3. The grab-a-hotdog game: At the hotdog stand in front of Ulrich’s, the owner of the stand looks like he’s taking a nap. There is a hot dog which costs \$1, but is worth \$2 to you. You can either pay for the hot dog, or try to steal it. The owner can either stay awake or take a nap. Taking a nap is worth \$5 to the owner of the cart…. but if he’s alert and you try to steal the hotdog, he’ll catch you, and he will force you to pay him \$10 for the hotdog! Consider this as a two-player, simultaneous move game. What is the pure-strategy equilibrium of this game? a) ( Pay, Alert ) b) ( Steal, Alert ) c) ( Pay, Nap ) d) ( Steal, Nap ) e) There is no pure strategy equilibrium.

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