EBK MICROECONOMICS
21st Edition
ISBN: 8220103960151
Author: McConnell
Publisher: YUZU
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Chapter 8, Problem 13DQ
To determine
Ethics of using the nudges.
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1. Alizeh and Kelly were traveling together and have gotten stranded at an airport overnight.
They have no cash, but they did both think to bring granola bars and turkey sandwiches with
them. They currently each have several granola bars and a few sandwiches. Alizeh announces
that she'd be willing to give up a granola bar for one turkey sandwich. Kelly responds that
turkey sandwiches are bigger than granola bars so she would be willing to give up a granola
bar if she could get half a turkey sandwich. Is Kelly and Alizeh's current allocation of granola
bars and turkey sandwiches efficient? Explain why or why not. (Note that you cannot rely
on a rule here – you have to specifically explain why the allocation does or does not meet the
definition of an efficient allocation.)
10. Player A and Player B are playing a game . First , Player A chooses to either " Keep " or " Pass " . Second , Player B observes A's choice and Player B then chooses to either Keep or Pass . This process continues which creates the sequential game below .
Please mark decisions that rational and selfish players will choose at every decision node ( 3 decisions by player A and 3 decisions by player B ) - mark them on the Figure . What is the equilibrium of this game ?
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- 4. Suppose that there is a negotiation between two players over a painting. Person 1, the seller, has no interest in the painting. On the other hand the painting is worth $100 to the buyer. If the painting is sold at a price in between 0 and 100, both are better off. Player 1 proposes a price p to player 2. Then, after observing player 1's offer, player 2 decides whether to accept it or to reject it. If the offer is rejected both get zero and the game ends. Find the unique SPNE of this game.arrow_forwardSuppose it is a well-known fact that among ten-year old Ford F-150s, half the trucks are good and half of them are lemons. Suppose that it is also known to all parties that a good truck is worth $8,000 to current owners and $10,000 to potential buyers. A bad truck, on the other hand, is only worth $1,000 to current owners and $2,000 to potential buyers. Throughout, assume that buyers are risk-neutral. 4) Suppose that after much haggling, the current owner is willing to let her truck go for $6,000. What is the most likely implication? a) The truck is a lemon. b) The buyer is an excellent negotiator. c) It's a mutually beneficial transaction.arrow_forwardHow do I work this word problem? Ace Alexia plays professional tennis for a living, but in spite of her big first serve, she is not very successful. During the last year, Ace could have earned $75,000 as a tennis instructor at the Atlanta Tennis Club. She would have spent $7,000 on meals, paid rent on a condo in Atlanta at $800 per month, and made car payments of $300 per month. Instead, she remained a pro and won $100,000 in prize money in various tournaments around the county. In doing so, she spent $12,000 on transportation and lodging and paid her coach/trainer $10,000 for the year. She also spent $7,000 on meals, paid rent on her condo in Atlanta at $800 per month, and made the payments on her car at $300 a month. Ace's opportunity cost of playing tennis last year was?arrow_forward
- Do not know how to solvearrow_forwardSuppose that there are three beachfront parcels of land available for sale in Astoria, and six people who would each like to purchase one parcel. Assume that the parcels are essentially identical and that the selling price of each is $745,000. The following table states each person's willingness and ability to purchase a parcel. Willingness and Ability to Purchase (Dollars) Alyssa 720,000 Brian 690,000 Crystal 680,000 Nick 900,000 Rosa 810,000 Tim 770,000 Which of these people will buy one of the three beachfront parcels? Check all that apply. Alyssa Brian Crystal Nick Rosa Tim Assume that the three beachfront parcels are sold to the people you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a price of $732,500. This fourth parcel _____________be sold…arrow_forwardSuppose you have $35,000 in wealth. You have the opportunity to play a game called "Big Bet/Small Bet." In this game, you first choose whether you would like to make a big bet of $15,000 of a small bet of $5,000. You then roll a fair die. If you roll a 4, 5, or 6, you win the game and earn $15,000 for the big bet or $5,000 for the small bet. If you roll a 1, 2, or 3, you lose and lose $15,000 for the big bet and $5,000 for the small bet the game Utility U₂ U₁ BEL 0 11 LATE EE ARTE Are the Small Bet and Big Bet considered fair bets? O Big Bet is fair, but Small Bet is not. No, both are not fair. Yes, both are fair. 20 OSmall Bet is fair, but Big Bet is not. G HA 1 35 D E 1 1 1 1 1 F 1 U 50 Income (thousands of dollars)arrow_forward
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- M3arrow_forwardPlease see attachedarrow_forward10) GE Fridges Some GE refrigerators have ice and water dispensers that won't dispense ice or water unless your filter authenticates as an official component produced by GE. Suppose one popular model costs $800 to produce, and each filter costs just $10 to produce. Suppose further that GE has categorized their consumers into two groups: low-volume users, who buy two filters per year and value the water and ice dispensing fridge at $1000, and high-volume users, who buy six filters per year and value the water and ice dispensing fridge at $1200. GE is considering two pricing strategies: ● Pricing strategy 1: $980 for refrigerator & $10 for filters Pricing strategy 2: $940 for refrigerator & $25 for filters a) Which pricing strategy would GE prefer? b) Based on the information in the question, I want you to come up with a better pricing strategy than what's been proposed. Specifically, what's the optimal price for the refrigerator and the optimal price for filters that will maximize…arrow_forward
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