Economics: Concepts
Economics: Math
Game Theory: Payoffs and Equilibria
Game Theory: Strategies
Probability and Statistics
100
What does the supply curve represent?
Relationship between the price of a good or service and the quantity of a good or service.
100
Provide an example of a positive externality.
Positive externality: when I do something, you benefit.
100
Suppose Player 1 rates alternative A with utility 40 and Player 2 rates it 20. Player 1 rates alternative B with utility 25 and Player 2 rates it 30. Is it correct to conclude that alternative B has a higher total utility? Why or why not?
No, both have the same total utility. (60)
100
What makes a threat or promise credible?
The ability and capability to happen or be carried out
100
Give an example of two events that are independent and explain why they are independent.
Flipping a coin then rolling a die because each outcome does not depend on the last.
200
What happens to the price when the quantity demanded decreases?
Price goes up.
200
What is consumer surplus?
400
200
Is the prisoner's dilemma Nash equilibrium Pareto optimal?
No! Both players could benefit more if they chose a different strategy.
200
What is a coalition?
A coalition is formed when two or more people or groups temporarily work together to achieve a common goal.
200
If you flip a coin and it lands on heads, you get $10. If it lands on tails, you lose $5. Assuming there is a 50% probability of the coin landing on either side, what is your expected payoff?
(0.5*10) - (0.5*5) = $2.5
300
Why does the supply curve slope upward?
As the price of something increases, so does the quantity supplied.
300
How do you find total welfare?
CS + PS
300
Find the payoff for Player 1 if moves are made simultaneously. Could Player 1 benefit if moves are made sequentially?
Payoff = 1 because Player 2 will always choose strategy A, therefore Player 1 will choose A with payoff 1.
Player 1 could benefit if moves are made sequentially and Player 2 chooses strategy B.
300
In playing the Prisoner's Dilemma, does it matter if you know the game is to be played more than once? Why or why not?
Yes, because if iterated, players can develop strategies and cooperate.
300
A sample of 5 households is selected and the size of each household is recorded. The median size is 3 and the mode is 5. What is the mean?
(1 + 2 + 3 + 5 + 5) / 5 = 3.2
400
Name 2 policies that the government could implement to reduce deadweight loss (DWL) in the market.
Subsidy, tax, price ceiling, price floor.
400
What is the total amount of social benefits currently being created by this externality at the equilibrium quantity?
15*10 = 150
400
Draw the payoff matrix for the game of Rock-Paper-Scissors. Let a win be payoff 1, a tie be payoff 0, and a loss be payoff -1.
400
In a 2-player game with 2 strategies each, there are four outcomes possible. How many different outcomes will there if you add 2 additional players (4 players total)?
2^4 = 16
400
ONE card is chosen at random from a standard deck of 52. Give an example of two mutually exclusive events or outcomes.
The card is a face card and a 10. These outcomes are mutually exclusive because a card cannot be simultaneously a face card and a 10.
500
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What can be implied by a perfectly elastic (flat) supply curve?
When quantity demanded changes, only quantity supplied changes (not price). Quantity supplied can be adjusted infinitely at a constant price.
500
Calculate the deadweight loss (DWL) in the market prior to the implemented policy. Assume that the social value (SMB curve) intersects the price line at $15. Hint: must calculate old CS, PS, and total welfare AND new CS, PS, and total welfare.
old CS: $15; old PS: $75; old TW: $90
new CS: $30; new PS: $120, new TW: $150
therefore, DWL was 150 - 90 = $60
500
Find the payoff for player 1 in the game below.
0
500
Is the Tragedy of the Commons game zero-sum? Is there a dominant strategy (if so, what is it)?
The dominant strategy is to overuse the common resource. Therefore, it is not zero-sum, since all players may end up worse when total payoffs decrease from overconsumption.
500
How many different arrangements are possible using all the letters in "wordle"?
6! = 720