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# econpexam - Practice Exam 2 1 Take the following gambles A1...

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Practice Exam 2 1. Take the following gambles: A 1 = 0.3 \$10 B 1 = 0.1 \$5 0.7 \$0 0.9 \$0 A 2 = 0.6 \$10 B 2 = x \$5 0.4 \$0 y \$0 Assume that you prefer A 1 to B 1 , and that you prefer B 2 to A 2 . Your preferences can be summarized by some von-Neumann/Morgenstern utility function for all of the following values of (x,y) except for: a. x = 0.2, y = 0.8 b. x = 0.5, y = 0.5 c. x = 0.7, y = 0.3 d. x = 0.9, y = 0.1 e. None of the above For questions 2 and 3, refer to the following game: 3,0 1,2 2,3 4,1 1,1 2,1 U D R L R L 1 2 2 M M

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2. How many pure strategy Nash equilbria are there in this game? 3. Which of the following is a Nash equilibrium of this game? For questions 4 and 5, refer to the following game: Jooyong Left Right Roy Up 1,0 0,2 Down 0,2 3,0 4. With what probability will Jooyong choose to play Right in Nash equilibrium? 5. If we increase Jooyong’s payoff to the outcome (Down, Left) from 2 to 4, with how much more probability will Jooyong play Left in Nash equilibrium? (i.e. what is the difference between the probability placed on Left in this new game and the probability placed on Left in the original game?) a. ¼ b. ½ c. ¾ d. 1 e. None of the above

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