Multiple Choice Questions: 3 points each (48 points total)
1. Suppose that a rich uncle promised to give you $10,000 in ten years. He
writes out this promise on a piece of paper. Your uncle is a well-known and
well-respected individual, whose credit is accepted anywhere in town. You’re
broke and want to buy some Pokemon trading cards on Ebay, so you decide
to sell the promise to the bank. If the interest rate is 10%, the bank should be
willing to give you _____ for a promise of $10,000 ten years into the future.
2. If your uncle promised to give you $10,000 each year till the end of time and
the interest rate stayed the same, how much would the promise be worth
3. Every game has three elements. These are:
a. Players, rules, and profits.
b. Nash equilbria, dominant strategies, and mixed strategies.
Players, dominant strategies, and backwards induced equilibria.
d. Players, strategies, and payoffs.
4. If you are playing an infinitely repeated prisoner’s dilemma game, then:
a. You should always cheat the first opportunity you get.
b. You should always cooperate if the other player is playing the tit-for-tat
You should always cooperate if the other player is playing the grim
d. Your decision to cheat or cooperate is based on the effective discount