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Describe a recent trend in the macroeconomic indicator or policy. Include a graph, chart, or table that illustrates the observed trend.
What does the term ‘shadow economy' mean? How does the shadow economy affect GDP in different countries?
Compute the expected value of the lottery. Compute the variance and the standard deviation of the lottery.
What is the winner's curse? Why can the winner's curse arise in a common-values auction but not in a private-values auction?
Why does perfect information have value, even for a risk-neutral decision maker?
What is fair insurance? Why will a risk-averse consumer always be willing to buy full insurance that is fair?
What is a risk premium? What determines the magnitude of the risk premium? What lottery would a risk-averse decision maker prefer?
Explain why diminishing marginal utility implies that a decision maker will be risk averse.
Why must the probabilities of the possible outcomes of a lottery add up to 1? What is the expected value of a lottery? What is the variance?
Professor Nash announces that he will auction off a $20 bill in a competition between Jack and Jill, two students. What is the Nash equilibrium in this game?
What is the Nash equilibrium (or equilibria) of the game you constructed in part (c)?
What is a strategic move? Why must strategic moves be hard to reverse in order to have strategic value?
What are the conditions that enhance the likelihood of a cooperative outcome in a repeated prisoners' dilemma game?
What is the difference between a pure strategy and a mixed strategy? Can a game have a Nash equilibrium even though neither player has a dominated strategy?
What is the difference between a dominant strategy and a dominated strategy? Why would a player in a game be unlikely to choose a dominated strategy?
What is special about the prisoners' dilemma game? Is every game presented in this chapter a prisoners' dilemma?
Let's imagine that a local retail market is monopolistically competitive. How many firms will operate in this market at a longrun equilibrium?
What is the Bertrand equilibrium price of shoes? How many pairs of shoes are purchased? How many shoes are purchased?
United Airlines and American Airlines both fly between Chicago and San Francisco. What is the Bertrand equilibrium in this market?
When firms choose outputs, as in the Cournot model, reaction functions slope. Why do output reaction functions differ from price reaction functions in this way?
Again consider the Coke and Pepsi example discussed in the chapter. Use graphs of reaction functions to illustrate what would happen to equilibrium prices?
What is the largest fixed fee you could charge the consumer, while ensuring that she is willing to participate in this market?
How should the regulator set S and m to maximize the sum of consumer and producer surplus while allowing the firm to earn exactly zero economic profit?
A monopolist faces two market segments. What is the monopolist's profit maximizing price in each segment?
If the firm can engage in third-degree price discrimination, what price should it set on each continent to maximize its profit?