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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 2B
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, 68 points total)
1.) Which of the following is not a characteristic of prisoner’s dilemma?
a.) the Nash equilibrium is the best outcome for both players
b.) both players have a dominant strategy
c.) both players have a dominated strategy
d.) there is no Nash equilibrium.
2.) In game theory we say that a player has a credible threat if
a.) it will be in the threatener’s interest to carry out when the time comes to act
b.) it is within the threatener’s power to carry out when the time comes to act
c.) it is in the interest of the person being threatened to make the threat
d.) none of the above
3.) We say that there is a dominant strategy in a game if
a.) one player has a strategy that yields the highest payoff regardless of the other player's choice
b.) both players have a strategy that yields the highest payoff independent of the other's choice
c.) both players make the same choice
c.) one payoff is the maximum possible combination of payoffs in the game
4.) Tit for tat refers to
a.) the emotional response people have if they receive a low offer in the ultimatum game
b.) the Nash equilibrium associated with a single play of the dating game
c.) a strategy that could be followed in a repeated game
d.) the outcome in which both prisoners confess in the prisoner’s dilemma game
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Questions 57 refer to the following decision tree for a sequential game.
First, Mo chooses a value
for X, choosing either X = 1 or X = 2.
Then Joe chooses a value for Y, either Y = 1 or Y = 2.
The
final payoffs are as shown in the far right column of the diagram.
5.) How would you characterize the Nash equilibrium for this game?
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 Fall '08
 Kim
 Economics

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