Suppose nick and rosa are playing a game in which both must simultaneously choose the action left or right. the payoff matrix that follows shows the payoff each person will earn as a function of both of their choices. for example, the lower-right cell shows that if nick chooses right and rosa chooses right, nick will receive a payoff of 6 and rosa will receive a payoff of 5.

nick rosa
left right
left 8.4 4.5
right 5.4 6.5

the only dominant strategy in this game is for to choose . the outcome reflecting the unique nash equilibrium in this game is as follows: nick chooses and rosa chooses .

The typical consumer's food basket in the base year 2015 is as follows: 30 chickens at $4 each 10 hams at $5 each 10 steaks at $8 each a chicken feed shortage causes the price of chickens to rise to $5.00 each in the year 2016. hams rise to $7.00 each, and the price of steaks is unchanged. a. calculate the change in the "cost-of-eating" index between 2015 and 2016. year cost of the basket 2015 $ 2016 $ instructions: enter your responses rounded to one decimal place. the official cost-of-eating index has by %. b. suppose that consumers are completely indifferent between two chickens and one ham. for this example, how large is the substitution bias in the official "cost-of-eating" index? the in the cost-of-eating index is %. the of inflation in the cost of eating reflects substitution bias.

Aprice ceiling is “binding” if the price ceiling is set below the equilibrium price. suppose that the equilibrium price is $5. if a price ceiling is set at $6, this will not affect the market in any way since $5 remains a legally allowable price (since $5 < $6). a price ceiling of $6 is called a “non-binding” price ceiling. on the other hand, if the price ceiling is set at $4, the price ceiling is “binding” because the natural equilibrium price is $5 but that is no longer allowed. what happens when there is a binding price ceiling? at a price below the equilibrium price, quantity demanded exceeds quantity supplied. there is a shortage. normally, price increases eliminate shortages by increasing quantity supplied and decreasing quantity demanded. in this case, however, price increases are not allowed past the price ceiling. we therefore predict that the observed market price will be right at the price ceiling and there will be a permanent shortage. the observed quantity bought and sold will be dictated by the quantity supplied at the price ceiling. although consumers would like to buy more, there are no more units for sale

Suppose the number of equipment sales and service contracts that a store sold during the last six (6) months for treadmills and exercise bikes was as follows: treadmill exercise bike total sold 185 123 service contracts 67 55 the store can only sell a service contract on a new piece of equipment. of the 185 treadmills sold, 67 included a service contract and 118 did not.