Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 1, Problem 1.9CE
To determine
To find: Representation of game tree, manager who makes first and second choice, importance of random play, bonus pay which represents a best reply response, comparison on contingent claims analysis in question 7 and 8.
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Economics
CHOOSE THE CORRECT ANSWER.
Remember that in the equilibrium prediction of an
ultimatum game, the Proposer will offer the
smallest non-zero amount of money possible.
First-year Commerce students were asked to play an Ultimatum game where a choice had to be made over the division of R100. Offers could only be
made in R10 increments, and the results of the various offers made are reported in the table below.
Amount offered by Proposer
RO
R10
R20
R30
R40
R50
Proportion rejected
100%
60%
50%
30%
10%
0%
What is the equilibrium split of the R100 between the Proposer and the Responder?
O A. Proposer: R50, Responder: R50
O B. Proposer: R10, Responder: R90
O C. Proposer: R90, Responder: R10
O D. Proposer: R60, Responder: R40
O E. Proposer: R40, Responder: R60
For the next set of multiple choice questions, consider a construction contract between a builder and a client, where
V = $20,000
R = $1,000
P = $15,000
V = the client's value of performance; R = the client's reliance investment; and P=the contract price, payable on
performance. Suppose that at the time the contact was made, the cost of performance to the builder is uncertain, but
it was known that it will definitely take one of the following values: C=($10,000; $14,000; $18,000; $22,000).
23. It is efficient for the builder to breach this contract if it turns out that
(a) C=$10,000
(b) C=$14,000
(c) C=$18,000
(d) C=$22,000.
24. Calculate the amount of expectation damages for this example. It is equal to:
(a) $1,000
(b) $5,000
(c) $15,000
(d) $20,000
25. Under expectation damages, the builder will breach the contract rather than perform if C equals
(a) $10,000
(b) $14,000
(c) $18,000
(d) $22,000
For each of the following scenarios, determine whether the decision maker is risk neutral, risk averse, or risk loving.a) A manager prefers a 10 percent chance of receiving $1,000 and a 90 percent chance of receiving $100 to receiving $190 for sure.b) A shareholder prefers receiving $775 with certainty to a 75 percent chance of receiving $1,000 and a 25 percent chance of receiving $100.c) A consumer is indifferent between receiving $550 for sure and a lottery that pays $1,000 half of the time and $100 half of the time.
Chapter 1 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Ch. 1 - One of the approaches for the Southern Company to...Ch. 1 - Prob. 2ECh. 1 - Prob. 3ECh. 1 - In the Southern Company Managerial Challenge,...Ch. 1 - Prob. 5ECh. 1 - Prob. 6ECh. 1 - Prob. 7ECh. 1 - Prob. 8ECh. 1 - Prob. 1.1CECh. 1 - Prob. 1.2CE
Ch. 1 - Prob. 1.3CECh. 1 - Prob. 1.4CECh. 1 - Prob. 1.5CECh. 1 - Prob. 1.6CECh. 1 - Prob. 1.7CECh. 1 - Prob. 1.8CECh. 1 - Prob. 1.9CECh. 1 - As a value-maximizing aluminum company, should...Ch. 1 - Prob. 2.2CECh. 1 - Prob. 2.3CECh. 1 - Prob. 2.4CECh. 1 - Energy entrepreneur T. Boone Pickens has proposed...
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