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Economics 2
your name _______________________________
Winter 2009
your TA’s name __________________________
day and time of your discussion section ________
PRACTICE SECOND EXAM
DIRECTIONS: No calculators, books, or notes of any kind are allowed.
All papers and notebooks
must remain closed and on the floor at all times throughout the exam, and students are not allowed to
leave the examination room until finished.
Answer all questions in the space provided with the exam.
HINTS: Feel free to use either of the following formulas if you find them useful.
Area of a triangle
= (1/2) (base) (height)
Area of a trapezoid
= (1/2) (base1 + base2) (height)
PART I: MULTIPLE CHOICE—circle the correct answer (4 points each, 76 points total)
Questions 1 through 3 refer to an advertising game between Alice’s company and Bonnie’s company.
Alice advertises
Alice doesn’t advertise
Bonnie advertises
Alice gets 30
Alice gets 40
Bonnie gets 30
Bonnie gets 60
Alice gets 40
Alice gets 50
Bonnie doesn’t advertise
Bonnie gets 20
Bonnie gets 50
1.) Which of the following statements is correct?
a.) Alice has a dominant strategy and Bonnie has a dominant strategy
b.) Alice has a dominant strategy but Bonnie does not have a dominant strategy
c.) Alice does not have a dominant strategy but Bonnie does have a dominant strategy
d.) Alice does not have a dominant strategy and Bonnie does not have a dominant strategy
2.) How would you characterize the Nash equilibrium for this game?
a.) In the Nash equilibrium, Alice and Bonnie will both get the same amount
b.) In the Nash equilibrium, Alice will get more than Bonnie
c.) In the Nash equilibrium, Alice will get less than Bonnie
d.) There is no Nash equilibrium for this game
3.) How would you characterize this game?
a.) prisoner’s dilemma
b.) ultimatum bargaining game
c.) titfortat
d.) none of the above
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4.) Which of the following is the best characterization of titfortat?
a.) if the other person defected last round, then you cooperate this round
b.) if the other person defected last round, then you defect this round
c.) if the other person defected last round, then you refuse to play this round
d.) if the other person cooperated last round, then you defect this round
5.) In game theory, a threat by Player A is said to be credible if
a.) the threatened action is within the power of Player A to carry out
b.) the threatened action would be in the interests of Player A to carry out
c.) the threatened action is exactly what Player B would want Player A to do
d.) the threatened action by A is exactly the same action that Player B was planning to do himself
6.) Consider the following version of the Ultimatum Bargaining Game.
The researcher gives ten one
dollar bills to Carlos.
Carlos is allowed to choose an integer X between 1 and 9 such that Carlos gets
$X and Miguel gets the remaining $(10  X).
Miguel is then allowed to say either yes, he accepts the
offer, in which case Carlos gets to take home X and Miguel gets to take home 10  X, or no, he
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 Spring '09
 HAMILTON
 Economics

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