Exam 18: Social Economics

Scenario: Catherine and Arthur are playing a game. They are put in two different rooms and asked to choose between two colors: black and white. If they both choose black, they will not get any money. If they both choose white, each of them will get $5. If one chooses white while the other chooses black, the one who chooses black will get $10 and the one who chooses white will get $0. -Refer to the scenario above.Which of the following is true in equilibrium?

Sarah and Claire are sisters.Their aunt gave ten cookies to Sarah and asked her to share some with Claire.She could choose how many she would give her,but if Claire was not happy with her share,her aunt would take back all the cookies. a)How should Sarah decide how many cookies to give Claire if Claire prefers more cookies to fewer cookies? b)Will there be any change in her decision if she knows that Claire values fairness?

Scenario: Tom and Harry are participating in a game in which the participants are divided into groups of two. Tom and Harry have been put in the same group. In each round of the game, Tom will be given an item. Tom can either give it to Harry or pass it on to the next team. If he decides to pass it on to the next team, neither of them will get the prize. If he gives it to Harry, Harry can either pass it on to the next team or sell it himself. If he passes it on to the next team, each of them will get $100. However, if he decides to sell it, he will get an amount higher than $100 and Tom will get nothing. -Refer to the scenario above.Which of the following will happen in equilibrium if the game is played only once?

There are two grocery stores in the new neighborhood that you have moved into.Because you did not know which store is better,you decided to go to the one that is relatively crowded.Your behavior is an example of ________.

Scenario: You are playing a game of "Friend or Foe?" You and your classmate are taken to two different rooms and asked to choose whether the other is a friend or foe. You are told that if both of you choose "friend," you will get $10 each. However, if both of you choose "foe," neither of you will get anything. If one of you chooses "friend" while the other chooses "foe," the one who chooses "foe" will get $20, while the one who chooses "friend" will get nothing. -Refer to the scenario above.In equilibrium,________.

Beth has moved into a new house.Most people living in her neighborhood go for a jog early in the morning.Although Beth had always been a late riser,she has started getting up early for a jog after moving into her new house.This is an example of ________.

In economics,________ refers to a preference for equal outcomes in a target population.

Scenario: Roger and Billy are two colleagues who were caught by their boss for forging an important document together and have been taken to separate rooms for interrogation. They are told that if both of them confess their crime, they will be charged a fine of $2,000. If neither of them confesses, they will be fined $1,000 each. However, if one of them confesses while the other does not, the one who confesses will be set free but the other will be fined $3,000. -Refer to the scenario above.In equilibrium,________.

Katie wanted to buy a new car.However,she could not select a model that both suited her needs and was affordable at the same time.She finally decided to buy a Porsche when she learned that two of her colleagues had bought them,despite its price exceeding the money she had saved for her car.Explain her behavior.

An information cascade occurs when ________.

Scenario: Pat and Joe are playing a game. The rules of the game are simple. Pat is given $100. He can either give it to Joe or keep it for himself. If he keeps it for himself, $50 will be taken back, and the remaining will be split between them. If he gives it to Joe, Joe can either divide it into two equal parts or keep it for himself. If he divides it into two equal parts, each of them will get $50. If he does not split the money, he will get the entire amount. -Refer to the scenario above.Suppose Pat can impose a fine of $70 if Joe chooses to keep the money,and the cost to Pat of imposing such a fine is $10.Which of the following is likely to happen if Pat is known to be vengeful?

Which branch of economics takes into consideration that economic agents do not always act rationally?

________ occurs when individuals conform to the decisions of others.

Scenario: Catherine and Arthur are playing a game. They are put in two different rooms and asked to choose between two colors: black and white. If they both choose black, they will not get any money. If they both choose white, each of them will get $5. If one chooses white while the other chooses black, the one who chooses black will get $10 and the one who chooses white will get $0. -Refer to the scenario above.If the players have to pay a fairness penalty of $6,________.

The willingness of individuals to sacrifice their own well-being to either improve the well-being of others or to punish those whom they perceive as behaving unkindly is called ________.

Scenario: Pat and Joe are playing a game. The rules of the game are simple. Pat is given $100. He can either give it to Joe or keep it for himself. If he keeps it for himself, $50 will be taken back, and the remaining will be split between them. If he gives it to Joe, Joe can either divide it into two equal parts or keep it for himself. If he divides it into two equal parts, each of them will get $50. If he does not split the money, he will get the entire amount. -Refer to the scenario above.Which of the following is likely to be true in equilibrium if Joe is known to be trustworthy?

Your neighbor's 10-year-old son has come to your house to collect money for a relief fund for hurricane victims.You were initially unwilling to contribute but agreed to donate when you discovered that he had already collected money from all your neighbors.This is an example of ________.

Scenario: Beth and Mary work as designers for a leading footwear manufacturer. Together, they came up with a new design that was successful from the day it was launched in the market. Impressed with their performance, their boss wants to reward them. He hands over $5,000 to Beth and asks her to offer Mary any amount she wants. If Mary accepts the offer, the money will be split in the decided proportion. However, if Mary rejects the offer, both of them will forgo the chance to be rewarded. -Refer to the scenario above.The situation here is similar to that in ________.

Scenario: Beth and Mary work as designers for a leading footwear manufacturer. Together, they came up with a new design that was successful from the day it was launched in the market. Impressed with their performance, their boss wants to reward them. He hands over $5,000 to Beth and asks her to offer Mary any amount she wants. If Mary accepts the offer, the money will be split in the decided proportion. However, if Mary rejects the offer, both of them will forgo the chance to be rewarded. -Refer to the scenario above.Beth should use ________ to play this game.

All charitable donations in Resourcia are tax deductible.However,it was found that the volume of charitable contributions declined significantly when the income tax rate in Resourcia was lowered.What is the reason behind such an outcome? Explain with an example.