Multiple Choice (Explanation optional). Follow all previous instructions, please: list 1-5 with the letter or letters you think is best. If you copy the document or a substantial part of it, you will lose points.
1. A Nash Equilibrium cannot be Pareto-Efficient if:
a. It’s in the Pareto-improving lens.
b. If the distribution of goods is not fair.
c. The players’ indifference curves intersect.
d. The players’ best-response functions cross.
2. Miguel maximizes his utility by:
a. Picking an outcome where his marginal benefit is equal to the marginal cost
b. Picking an outcome where his mrs=mrt.
c. Picking an outcome where his mrs>mrt.
d. Picking an outcome where his mrs
3. The Nash equilibrium is not:
a. A result of both players using their best response functions.
b. Where the two players’ best response functions intersect.
c. An outcome where the players have no incentive to change their current strategy.
d. Where two player’s best response functions are tangent.
4. When employers and unions negotiate wages and hours:
a. The union has take-it or leave it power
b. The employer has take-it or leave it power
c. They can achieve a Pareto-inefficient outcome.
d. All of the above.
5. Cooperative negotiation, as in the fishing cooperatives:
a. Assume self-regarding preferences
b. Yield higher utility than TIOLI
c. Be easier to achieve, if the players agree to split the utility equally.
d. All of the above
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Homework 5 Professor Saunders
Spring 2021 Student I.D. ______________
Economics 203 Due April 26, 2021 on TURNITIN
Essay: Choose any 1. Your short essay should be original. Don’t forget to cite references (from class or the web). TURNITIN will flag all unoriginal material!
1. Describe in your own words, the efficiency and equity effects of altruism:
a. Design an example where you choose λ for each player & write out their utility functions.
b. Draw an Edgeworth box that is consistent with the λ that you chose.
c. Describe how the PEC in your game compares to our baseline “homo-economicus” game.
d. Discuss any differences in your game regarding equality and efficiency.
2. Explain, in your own words, how the following affect the extent of competition in a market:
The way in which the authors estimate a price decreases resulting from more firms entering the market.