Deck 18: Social Economics

Question 1

Jack refused to donate money for the building of a public park when he was contacted individually.However,he readily agreed to donate when he was asked to contribute for a similar cause in front of his neighbors.Such behavior is an example of ________.

A) pure altruism
B) consumerism
C) rationalism
D) impure altruism

Answer 1

impure altruism

Question 2

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 ________.

A) pure altruism
B) impure altruism
C) liberalism
D) rationalism

Answer 2

impure altruism

Question 3

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

A) randomness
B) rationalism
C) fairness
D) liberalism

Answer 3

fairness

Question 4

People giving to charity because of selfish reasons,such as the appearance of generosity,is categorized as ________.

A) pure altruism
B) impure altruism
C) consumerism
D) rationalism

Question 5

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

A) Microeconomics
B) Macroeconomics
C) Behavioral economics
D) Econometrics

Question 6

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.

Question 7

La Dila Corp.decided to sponsor an AIDS awareness campaign when it discovered that its rival had been sponsoring several fundraising events for AIDS-afflicted children.This is an example of ________.

A) bounded rationality
B) pure altruism
C) impure altruism
D) consumerism

Question 8

Jane donates time and money to charity because she values helping others.This is an example of ________.

A) pure altruism
B) rationalism
C) impure altruism
D) liberalism

Question 9

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?

A) Catherine will get $10, and Arthur will get $5.
B) Catherine will get $5, and Arthur will get $10.
C) Catherine and Arthur will each get $5.
D) Catherine and Arthur will each get $0.

Question 10

Gary usually does not donate to charity.However,he donated money for an environmental awareness campaign launched by his friend.This is an example of ________.

A) rationalism
B) pure altruism
C) impure altruism
D) liberalism

Question 11

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 ________.

A) rationalism
B) altruism
C) indoctrination
D) fairness

Question 12

Why do people donate less when it is costlier to give?

Question 13

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,________.

A) Catherine would choose white, and Arthur would choose black
B) Catherine and Arthur would both choose white
C) Catherine and Arthur would both choose black
D) Catherine would choose black, and Arthur would choose white

Question 14

William was asked to contribute money for a retirement home.He agreed to contribute only if his name appeared on the list of donors in the newsletter published by the home every year.This is an example of ________.

A) rationalism
B) liberalism
C) impure altruism
D) pure altruism

Question 15

Most charitable contributions in the United States are usually given to ________.

A) environmental causes
B) religious causes
C) basic necessities
D) educational causes

Question 16

George donates money to charity only when somebody he knows approaches him for such donations.This is an example of ________.

A) rationalism
B) impure altruism
C) pure altruism
D) liberalism

Question 17

People giving to charity because they value helping others is categorized as ________.

A) pure altruism
B) rationalism
C) impure altruism
D) consumerism

Question 18

Differentiate between the two types of altruism.

Question 19

What are the two ways by which people can help charitable causes?

Question 20

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.What will be the outcome of this game?

A) Both players will choose black.
B) Both players will choose white.
C) Arthur will choose white, and Catherine will choose black.
D) Catherine will choose white, and Arthur will choose black.

Question 21

Scenario: Robert and Alice are participating in a reality show on television. Robert is offered $500 and is told that he can keep the money as long as he shares some of it with Alice. Robert can offer Alice as much or as little as he likes, but if Alice rejects his offer, neither of them will get to keep any money.
Refer to the scenario above.If Alice values fairness,________.

A) she will not accept any offer made by Robert
B) Robert should make the lowest possible offer to Alice
C) she will accept the offer when Robert offers $250
D) Robert should not play the game

Question 22

Scenario: Jack and Jill are siblings. Jack's father asked him how much money he would offer Jill if he gives him $50 as pocket money. He also told Jack that if Jill refuses the offer Jack makes, neither of them will get any money.
Refer to the scenario above.A player should use ________ to play this game.

A) forward induction
B) backward induction
C) mixed strategies
D) her dominant strategy

Question 23

Scenario: Two colleagues-Mathew and Peter-have successfully completed a project, and their employer has decided to reward them in a unique way. Each of them is taken to a separate room and asked to choose whether the other colleague is a good teammate or a bad teammate. They are told that if both of them choose "bad," they will not get any reward. If both of them choose "good," they will get $5,000 each. If one chooses "good" while the other chooses "bad," the one who chooses "bad" will get $10,000 and the one who chooses "good" will not get anything.
Refer to the scenario above.If the players have to pay a fairness penalty of $7,000,________.

A) they will both choose "good"
B) they will both choose "bad"
C) Mathew will choose "bad," and Peter will choose "good"
D) Mathew will choose "good" and Peter will choose "bad"

Question 24

Scenario: Phillip and Joseph are two classmates who represented their college in a quiz competition as a team and won $500. The winning amount was handed over by the organizers to their professor, who had accompanied them. The professor gave the money to Phillip and asked him to offer any amount he wants to Joseph. If Joseph accepts the offer, the money would be split in the decided proportion between them. However, if Joseph rejects the offer, the money would go to their college fund.
Refer to the scenario above.This is an example of ________.

A) an ultimatum game
B) the prisoners' dilemma
C) a zero-sum game
D) a symmetric game

Question 25

Scenario: Jack and Jill are siblings. Jack's father asked him how much money he would offer Jill if he gives him $50 as pocket money. He also told Jack that if Jill refuses the offer Jack makes, neither of them will get any money.
Refer to the scenario above.This is an example of ________.

A) a zero-sum game
B) a symmetric game
C) an ultimatum game
D) the prisoners' dilemma

Question 26

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.Which of the following is true in equilibrium?

A) Roger and Billy will each pay a fine of $1,000.
B) Roger and Billy will each pay a fine of $0.
C) Roger and Billy will each pay a fine of $3,000.
D) Roger and Billy will each pay a fine of $2,000.

Question 27

Scenario: Jack and Jill are siblings. Jack's father asked him how much money he would offer Jill if he gives him $50 as pocket money. He also told Jack that if Jill refuses the offer Jack makes, neither of them will get any money.
Refer to the scenario above.If Jill values fairness,________.

A) she will not accept any offer made by Jack
B) Jack should make the lowest possible offer to Jill
C) she will accept the offer when Jack offers $25
D) Jack should not play the game

Question 28

Scenario: Two colleagues-Mathew and Peter-have successfully completed a project, and their employer has decided to reward them in a unique way. Each of them is taken to a separate room and asked to choose whether the other colleague is a good teammate or a bad teammate. They are told that if both of them choose "bad," they will not get any reward. If both of them choose "good," they will get $5,000 each. If one chooses "good" while the other chooses "bad," the one who chooses "bad" will get $10,000 and the one who chooses "good" will not get anything.
Refer to the scenario above.In equilibrium,________.

A) Mathew will choose "good" and Peter will choose "bad"
B) Peter will choose "good" and Mathew will choose "bad"
C) both Mathew and Peter will choose "bad"
D) both Mathew and Peter will choose "good"

Question 29

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,________.

A) you will choose "friend," and your classmate will choose "foe"
B) you will choose "foe," and your classmate will choose "friend"
C) both of you will choose "foe"
D) both of you will choose "friend"

Question 30

Scenario: Robert and Alice are participating in a reality show on television. Robert is offered $500 and is told that he can keep the money as long as he shares some of it with Alice. Robert can offer Alice as much or as little as he likes, but if Alice rejects his offer, neither of them will get to keep any money.
Refer to the scenario above.Robert should use ________ to play this game.

A) forward induction
B) backward induction
C) mixed strategies
D) his dominant strategy

Question 31

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,________.

A) both colleagues will confess
B) both colleagues will deny the crime
C) Roger will confess while Billy will deny the crime
D) Billy will confess while Roger will deny the crime

Question 32

Scenario: Two colleagues-Mathew and Peter-have successfully completed a project, and their employer has decided to reward them in a unique way. Each of them is taken to a separate room and asked to choose whether the other colleague is a good teammate or a bad teammate. They are told that if both of them choose "bad," they will not get any reward. If both of them choose "good," they will get $5,000 each. If one chooses "good" while the other chooses "bad," the one who chooses "bad" will get $10,000 and the one who chooses "good" will not get anything.
Refer to the scenario above.Which of the following is true?

A) Mathew and Peter will each receive $10,000 in equilibrium.
B) Neither Mathew nor Peter will receive any reward in equilibrium.
C) Mathew will receive $10,000, and Peter will receive $5,000 in equilibrium.
D) Mathew will receive $5,000 and Peter will receive $10,000 in equilibrium.

Question 33

Scenario: Phillip and Joseph are two classmates who represented their college in a quiz competition as a team and won $500. The winning amount was handed over by the organizers to their professor, who had accompanied them. The professor gave the money to Phillip and asked him to offer any amount he wants to Joseph. If Joseph accepts the offer, the money would be split in the decided proportion between them. However, if Joseph rejects the offer, the money would go to their college fund.
Refer to the scenario above.Phillip should play this game using ________.

A) backward induction
B) forward induction
C) mixed strategies
D) his dominant strategy

Question 34

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.If there is fairness penalty of $12,________.

A) both you and your friend will choose "foe"
B) both you and your friend will choose "friend"
C) you will choose "friend," while your friend will choose "foe"
D) you will choose "foe," while your friend will choose "friend"

Question 35

Scenario: Phillip and Joseph are two classmates who represented their college in a quiz competition as a team and won $500. The winning amount was handed over by the organizers to their professor, who had accompanied them. The professor gave the money to Phillip and asked him to offer any amount he wants to Joseph. If Joseph accepts the offer, the money would be split in the decided proportion between them. However, if Joseph rejects the offer, the money would go to their college fund.
Refer to the scenario above.If Joseph prefers fairness to money,________.

A) he will not accept any offer made by Phillip
B) he will always accept any offer made to him
C) he will accept the offer if offered an equal share of the money
D) Phillip will offer the minimum amount of money to Joseph

Question 36

Scenario: Phillip and Joseph are two classmates who represented their college in a quiz competition as a team and won $500. The winning amount was handed over by the organizers to their professor, who had accompanied them. The professor gave the money to Phillip and asked him to offer any amount he wants to Joseph. If Joseph accepts the offer, the money would be split in the decided proportion between them. However, if Joseph rejects the offer, the money would go to their college fund.
Refer to the scenario above.If Joseph prefers more money to less,________.

A) he will not accept any offer made by Phillip
B) he will always accept any offer made to him
C) Phillip will offer the lowest possible amount to Joseph
D) he will accept the offer only if Phillip pays him an equal share of the money

Question 37

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.If the colleagues had decided on a fairness penalty of $5,000 before committing the crime,________.

A) both of them will confess during interrogation
B) both of them will deny the crime during interrogation
C) Roger will confess while Billy will deny the crime during interrogation
D) Billy will confess while Roger will deny the crime during interrogation

Question 38

Scenario: Robert and Alice are participating in a reality show on television. Robert is offered $500 and is told that he can keep the money as long as he shares some of it with Alice. Robert can offer Alice as much or as little as he likes, but if Alice rejects his offer, neither of them will get to keep any money.
Refer to the scenario above.This is an example of ________.

A) a symmetric game
B) an ultimatum game
C) the prisoners' dilemma
D) a zero-sum game

Question 39

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.Which of the following is true for this game in equilibrium?

A) You and your friend will both get $10 each.
B) You and your friend will not get any payoff.
C) You will get $20, while your friend will get $10.
D) You will get $10, while your friend will get $20.

Question 40

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 ________.

A) the prisoners' dilemma
B) a zero-sum game
C) an ultimatum game
D) a symmetric game

Question 41

When does the second player in an ultimatum game reject the offer made by the first player?

Question 42

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 Harry is known to be trustworthy?

A) Tom will trust Harry, and Harry will cooperate.
B) Tom will trust Harry, and Harry will defect.
C) Neither of them will make any money.
D) Only Harry will make money.

Question 43

Neil and Derek are brothers who are very fond of watching television.They share a television but watch different shows.Every evening,after coming home from school,they argue over who will watch television and for how long.Irritated by their fighting,their parents asked Neil to decide how long each of them would watch television.They also told him that if the brothers failed to reach an agreement,they would not let either of them watch television.
a)How should Neil make his decision?
b)What will be the outcome if Derek prefers fairness over watching television?

Question 44

The responder in an ultimatum game is likely to reject an offer of 10 percent of $1 but is less likely to reject an offer of 10 percent of $100.What is the reason behind such inconsistent behavior?

Question 45

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?

Question 46

Scenario: You walk onto a used car lot to buy a car. You are willing to pay up to $15,000 for a car of good quality, but you value a lemon at $0. You are now wondering whether you should trust the car dealer when it comes to the quality of his cars. If you choose to trust him, he can choose to cooperate or defect. If you do not trust him, he will not earn any money and you will not be able to buy a car. If you trust him and he cooperates, both of you will gain, because the dealer values a good-quality car at $13,000. However, if he defects, he will earn $15,000, while you will not derive any satisfaction.
Refer to the scenario above.Which of the following will happen in equilibrium?

A) You will trust him, and he will defect.
B) You will trust him, and he will cooperate.
C) You will not trust him.
D) You will not make any purchase.

Question 47

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.If Mary prefers fairness to money,________.

A) she will not accept any offer that Beth makes
B) she will accept any offer that Beth makes
C) she will accept the offer only if Beth offers her $2,500
D) she will accept the offer only if Beth offers her $5,000

Question 48

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 be true if Harry is known to be trustworthy?

A) Tom and Harry will each receive $100.
B) The equilibrium outcome will be socially inefficient.
C) A unique equilibrium will not occur.
D) Tom and Harry will each receive $50.

Question 49

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.If Mary prefers more money to less,________.

A) she will not accept any offer that Beth makes
B) she will accept any offer that Beth makes
C) she will accept the offer only if Beth offers her $2,500
D) she will accept the offer only if Beth offers her $5,000

Question 50

Scenario: Your car broke down while you were driving to the office one morning. You took it to the nearest service center and were told by the mechanic that you need to pay $500 for the repair. You are uncertain about whether to trust him. If you do not trust him, you have to take it to another service center, which is far away and inconvenient. If you trust him, he can either cooperate or defect (do an honest job or not). If he does an honest job, both of you will gain from the trade. If he does not do an honest job, he will gain $500 while you will lose your money. Clearly, he will gain more by defecting rather than by cooperating with you.
Refer to the scenario above.You should use ________ to make your decision.

A) backward induction
B) forward induction
C) mixed strategies
D) your dominant strategy

Question 51

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.This is an example of ________.

A) a zero-sum game
B) a trust game
C) an ultimatum game
D) the prisoners' dilemma

Question 52

Scenario: You walk onto a used car lot to buy a car. You are willing to pay up to $15,000 for a car of good quality, but you value a lemon at $0. You are now wondering whether you should trust the car dealer when it comes to the quality of his cars. If you choose to trust him, he can choose to cooperate or defect. If you do not trust him, he will not earn any money and you will not be able to buy a car. If you trust him and he cooperates, both of you will gain, because the dealer values a good-quality car at $13,000. However, if he defects, he will earn $15,000, while you will not derive any satisfaction.
Refer to the scenario above.Which of the following is true if the car dealer has a reputation for trustworthiness?

A) The equilibrium outcome is equitable.
B) You will pay the car dealer $15,000 for a bad-quality car.
C) You will pay the car dealer $13,000 for a good-quality car.
D) The equilibrium outcome is socially inefficient.

Question 53

Scenario: You walk onto a used car lot to buy a car. You are willing to pay up to $15,000 for a car of good quality, but you value a lemon at $0. You are now wondering whether you should trust the car dealer when it comes to the quality of his cars. If you choose to trust him, he can choose to cooperate or defect. If you do not trust him, he will not earn any money and you will not be able to buy a car. If you trust him and he cooperates, both of you will gain, because the dealer values a good-quality car at $13,000. However, if he defects, he will earn $15,000, while you will not derive any satisfaction.
Refer to the scenario above.Which of the following is true in equilibrium?

A) The equilibrium outcome in this case is equitable.
B) The equilibrium outcome in this case is socially inefficient.
C) You will end up paying $10,000 for a good-quality car.
D) You will end up paying $15,000 for a bad-quality car.

Question 54

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.

A) forward induction
B) backward induction
C) mixed strategies
D) her dominant strategy

Question 55

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.Tom should use ________ to play this game.

A) backward induction
B) forward induction
C) mixed strategies
D) his dominant strategy

Question 56

One Sunday afternoon,your mother tells you and your brother that you can make some money by helping her wash dishes.Both of you decide to help her.Once both of you are done with the work,your mother gives you a $20 bill.She also says that you can divide the money between yourself and your brother in any proportion you want,but if your brother does not accept the amount he is being given,she will take all the money back.
a)How much money should you offer your brother if he prefers more money to less?
b)How much money should you offer your brother if you know that your brother prefers fairness to money?

Question 57

Scenario: You walk onto a used car lot to buy a car. You are willing to pay up to $15,000 for a car of good quality, but you value a lemon at $0. You are now wondering whether you should trust the car dealer when it comes to the quality of his cars. If you choose to trust him, he can choose to cooperate or defect. If you do not trust him, he will not earn any money and you will not be able to buy a car. If you trust him and he cooperates, both of you will gain, because the dealer values a good-quality car at $13,000. However, if he defects, he will earn $15,000, while you will not derive any satisfaction.
Refer to the scenario above.You should use ________ to arrive at a decision.

A) backward induction
B) forward induction
C) mixed strategies
D) tit-for-tat strategy

Question 58

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?

A) Social surplus will be maximized.
B) Tom will trust Harry, and Harry will defect.
C) Tom will trust Harry, and Harry will cooperate.
D) Neither of them will make any money.

Question 59

An economics professor has devised an interesting game to test the understanding of his students.He randomly selects two students from his class and gives one of them a $50 bill.He then asks the student what percentage of the $50 she would give to her classmate.The first student can choose any percentage she wishes,while the second student can choose whether or not to accept the offer.If the second student does not accept the offer,the professor will take the bill back,but if he accepts the offer,the money will be divided in the ratio decided by the first student.
a)What is the likely outcome of this game if both students value more money to less?
b)What is the likely outcome of this game if the second student values fairness?

Question 60

Scenario: You walk onto a used car lot to buy a car. You are willing to pay up to $15,000 for a car of good quality, but you value a lemon at $0. You are now wondering whether you should trust the car dealer when it comes to the quality of his cars. If you choose to trust him, he can choose to cooperate or defect. If you do not trust him, he will not earn any money and you will not be able to buy a car. If you trust him and he cooperates, both of you will gain, because the dealer values a good-quality car at $13,000. However, if he defects, he will earn $15,000, while you will not derive any satisfaction.
Refer to the scenario above.Which of the following will happen in equilibrium if the car dealer has a reputation for trustworthiness?

A) You will trust him, and he will cooperate.
B) You will trust him, and he will defect.
C) You will not trust him.
D) You will earn positive consumer surplus.

Question 61

Mark and Anthony are participating in a trust game.Mark is given a locked box containing five $100 bills and a key.He can either unlock the box himself,or he can give it to Anthony.Anthony can either unlock the box himself,or return it to the moderator of the game.If Mark unlocks the box himself,he will get $200 and Anthony will get $100,while the rest will be taken back.If Anthony unlocks the box,they will receive $250 each.If Anthony returns the box to the moderator,he will receive $300,while Mark will not get any money.What will the equilibrium outcome of this game be?

Question 62

An environmental protection agency in Natura has launched a campaign against the use of plastic bags.This is an example of ________.

A) backward induction
B) indoctrination
C) anchoring
D) sniping

Question 63

Scenario: Elly owns a small coffee shop. She has only one employee. One weekend, she decides to take a break from work. She is wondering whether she should trust her employee to run the shop in her absence. If she does not trust him, she would have to keep the shop closed, in which case neither she nor her employee will be able to make money. In contrast, if she trusts him, he can either cooperate and run the shop or he can defect and steal from the shop. If he cooperates, both of them will earn money. If he steals from the shop, he will make more money while she will lose.
Refer to the scenario above.Which of the following will happen in this case?

A) Neither of them will make any money.
B) Only Elly will make money.
C) Elly will trust her employee, but her employee will defect.
D) Elly will trust her employee, and her employee will cooperate.

Question 64

Scenario: Your car broke down while you were driving to the office one morning. You took it to the nearest service center and were told by the mechanic that you need to pay $500 for the repair. You are uncertain about whether to trust him. If you do not trust him, you have to take it to another service center, which is far away and inconvenient. If you trust him, he can either cooperate or defect (do an honest job or not). If he does an honest job, both of you will gain from the trade. If he does not do an honest job, he will gain $500 while you will lose your money. Clearly, he will gain more by defecting rather than by cooperating with you.
Refer to the scenario above.Which of the following is true?

A) The equilibrium outcome in this case is equitable.
B) The equilibrium outcome in this case is socially inefficient.
C) The equilibrium outcome in this case is socially efficient but not equitable.
D) The equilibrium outcome in this case is both equitable and socially efficient.

Question 65

An organic food manufacturing company has launched a campaign against the consumption of inorganic food.This is an example of ________.

A) backward induction
B) indoctrination
C) anchoring
D) sniping

Question 66

Scenario: Elly owns a small coffee shop. She has only one employee. One weekend, she decides to take a break from work. She is wondering whether she should trust her employee to run the shop in her absence. If she does not trust him, she would have to keep the shop closed, in which case neither she nor her employee will be able to make money. In contrast, if she trusts him, he can either cooperate and run the shop or he can defect and steal from the shop. If he cooperates, both of them will earn money. If he steals from the shop, he will make more money while she will lose.
Refer to the scenario above.Which of the following will hold true if Elly is known to be vengeful?

A) A socially efficient outcome will occur.
B) Multiple equilibria will occur.
C) The outcome will be equitable.
D) A socially inefficient equilibrium will occur.

Question 67

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?

A) Pat and Joe will each receive $25.
B) Pat and Joe will each receive $50.
C) Pat and Joe will each receive $0.
D) Pat will receive $0, and Joe will receive $100.

Question 68

Two individuals are playing a trust game that has three rounds.In the first two rounds of the game,they have accumulated $1,000 as a team.In the third round,Player 1 is blindfolded and asked to decide whether he would let Player 2 guide him to a particular destination or opt out of the game.If he lets Player 2 guide him,Player 2 can either guide him to the correct destination or take him elsewhere.If she leads him to the correct destination,each of them will get half of the accumulated money.However,if Player 2 leads him astray,Player 2 will get 75 percent of the accumulated money and Player 1 will get 25 percent.If Player 1 opts out of the game,he will get 30 percent of the accumulated money and Player 2 will get 20 percent.
a)What is the equilibrium outcome in this case?
b)How will the equilibrium change if the players can impose a guilt penalty of 60 percent of the accumulated money on the defecting player?

Question 69

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.This is similar to ________.

A) a tit-for-tat game
B) a trust game
C) a zero-sum game
D) the prisoners' dilemma

Question 70

Why is the equilibrium in a trust game socially inefficient?

Question 71

Under what circumstances will the equilibrium in a trust game be efficient?

Question 72

Scenario: Elly owns a small coffee shop. She has only one employee. One weekend, she decides to take a break from work. She is wondering whether she should trust her employee to run the shop in her absence. If she does not trust him, she would have to keep the shop closed, in which case neither she nor her employee will be able to make money. In contrast, if she trusts him, he can either cooperate and run the shop or he can defect and steal from the shop. If he cooperates, both of them will earn money. If he steals from the shop, he will make more money while she will lose.
Refer to the scenario above.This is an example of ________.

A) an ultimatum game
B) the prisoners' dilemma game
C) a trust game
D) a zero-sum game

Question 73

Scenario: Your car broke down while you were driving to the office one morning. You took it to the nearest service center and were told by the mechanic that you need to pay $500 for the repair. You are uncertain about whether to trust him. If you do not trust him, you have to take it to another service center, which is far away and inconvenient. If you trust him, he can either cooperate or defect (do an honest job or not). If he does an honest job, both of you will gain from the trade. If he does not do an honest job, he will gain $500 while you will lose your money. Clearly, he will gain more by defecting rather than by cooperating with you.
Refer to the scenario above.Which of the following will happen in equilibrium?

A) You will trust him, and he will defect.
B) You will trust him, and he will cooperate.
C) Neither of you will gain from trade.
D) Only the mechanic will gain.

Question 74

Scenario: Elly owns a small coffee shop. She has only one employee. One weekend, she decides to take a break from work. She is wondering whether she should trust her employee to run the shop in her absence. If she does not trust him, she would have to keep the shop closed, in which case neither she nor her employee will be able to make money. In contrast, if she trusts him, he can either cooperate and run the shop or he can defect and steal from the shop. If he cooperates, both of them will earn money. If he steals from the shop, he will make more money while she will lose.
Refer to the scenario above.Elly should use ________ to make her decision.

A) mixed strategies
B) backward induction
C) forward induction
D) her dominant strategy

Question 75

Scenario: Your car broke down while you were driving to the office one morning. You took it to the nearest service center and were told by the mechanic that you need to pay $500 for the repair. You are uncertain about whether to trust him. If you do not trust him, you have to take it to another service center, which is far away and inconvenient. If you trust him, he can either cooperate or defect (do an honest job or not). If he does an honest job, both of you will gain from the trade. If he does not do an honest job, he will gain $500 while you will lose your money. Clearly, he will gain more by defecting rather than by cooperating with you.
Refer to the scenario above.Which of the following is likely to happen if the service center has a reputation for trustworthiness?

A) You will trust the mechanic, and he will cooperate.
B) You will trust the mechanic, but he will defect.
C) Neither of you will gain from trade.
D) Only the mechanic will gain.

Question 76

________ is the process by which organizations imbue society with their ideology or opinion.

A) Indoctrination
B) Backward induction
C) Anchoring
D) Sniping

Question 77

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?

A) Joe will choose to split the money into two parts if Pat gives it to him.
B) Joe will choose to keep the entire money for himself if Pat gives it to him.
C) Pat will not give the money to Joe.
D) A unique equilibrium will not occur.

Question 78

Scenario: Elly owns a small coffee shop. She has only one employee. One weekend, she decides to take a break from work. She is wondering whether she should trust her employee to run the shop in her absence. If she does not trust him, she would have to keep the shop closed, in which case neither she nor her employee will be able to make money. In contrast, if she trusts him, he can either cooperate and run the shop or he can defect and steal from the shop. If he cooperates, both of them will earn money. If he steals from the shop, he will make more money while she will lose.
Refer to the scenario above.Which of the following is likely to happen if Elly is known to be vengeful?

A) Neither of them will make money.
B) Only Elly will make money.
C) Only Elly's employee will make money.
D) Both Elly and her employee will earn money.

Question 79

Scenario: Your car broke down while you were driving to the office one morning. You took it to the nearest service center and were told by the mechanic that you need to pay $500 for the repair. You are uncertain about whether to trust him. If you do not trust him, you have to take it to another service center, which is far away and inconvenient. If you trust him, he can either cooperate or defect (do an honest job or not). If he does an honest job, both of you will gain from the trade. If he does not do an honest job, he will gain $500 while you will lose your money. Clearly, he will gain more by defecting rather than by cooperating with you.
Refer to the scenario above.Which of the following will be true if the service center has a reputation for trustworthiness?

A) The equilibrium outcome will be equitable.
B) A unique equilibrium will not occur.
C) You will pay the mechanic $500, but he will defect.
D) You will pay the mechanic $500, and he will cooperate.

Question 80

There are two players in a game.In each round of the game,one player has to trust the other for a particular task.In the first round,Player 1 has to decide whether she will trust Player 2.If she does not trust Player 2,she will get one-third of the prize money,while Player 2 will get the rest of the prize money.If she trusts Player 2,Player 2 can either cooperate with her or defect.If Player 2 defects,Player 1 will earn $0,while Player 2 will get the entire prize money.If Player 2 cooperates,each of them will get half the prize money.What will the equilibrium outcome of this game be if Player 1 can impose a guilt penalty of two-thirds of the prize money and is known to be a vengeful player?