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midterm 1 practice2

midterm 1 practice2 - ECON 398 Fall 2006 Midterm 1 Practice...

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ECON 398 Fall 2006 Midterm 1 Practice Exam 2 Professor Ozdenoren INSTRUCTIONS You have 80 minutes to complete the exam. There are 16 questions.

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1. Notice that there is a variable x in the payoffs of the following game: Carrie R L Rhonda U 3,4 2,3 D 1,3 x ,10 For what values of x is there exactly one pure strategy Nash equilibrium? a) for all x > 1 b) for all x < 2 c) for all x > 2 d) for all x < 3 e) for all x > 3 2. Roland and Colin: part 1 Colin R L Roland U \$5, \$1 \$0, \$0 D \$5.50,\$1 \$3, \$3 If Roland and Colin play this game, how much should Colin expect to make? a) \$0 b) \$0.75 c) \$1 d) \$2 e) \$3
3. Roland and Colin: Part 2 In the game above, suppose that the following move is available to Roland before the game begins: For the price of one dollar, he can have one of his actions U or D publicly removed (committing himself to the other action). What should he do and why? a) Keep the dollar. Removing an action does not help him at all. b) Keep the dollar. Removing an action does help him, but not enough to justify the cost. c) Pay 1 dollar and remove “U”. Committing to playing D wins him more than one dollar. d) Pay 1 dollar and remove “D”. Committing to playing U wins him more than one dollar. e) None of the above. 4. Retro Sixties Free Love Competition in Ann Arbor: Part 1 Middle Earth (M) and Stairway to Heaven (S) are the only two stores in Ann Arbor that sell lava lamps. Suppose that these lamps cost \$10 each to produce.

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