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Economics 2
your name _______________________________
Fall 2011
your TA’s name __________________________
day and time of your discussion section ________
your student id number _____________________
Practice Exam 2a
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, 80 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 earns 5
Alice earns 10
Bonnie earns 20
Bonnie earns 10
Alice earns 15
Alice earns 20
Bonnie doesn’t advertise
Bonnie earns 15
Bonnie earns 5
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.) Alice advertises and Bonnie advertises
b.) Alice advertises and Bonnie doesn’t advertise
c.) Alice doesn’t advertise and Bonnie advertises
d.) Alice doesn’t advertise and Bonnie doesn’t advertise
3.) How would you characterize this game?

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4.) Which of the following statements is the best characterization of a two-player game in which
Player 1 has a dominant strategy but Player 2 does not?

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