Exam 18: Social Economics

________ is a tendency to search for information that reaffirms individuals' own beliefs,thus entrenching them further in their own prejudices.

An economics professor has devised an interesting game to test the understanding of his students.He randomly selects two students from his class and gives one of them a $50 bill.He then asks the student what percentage of the $50 she would give to her classmate.The first student can choose any percentage she wishes,while the second student can choose whether or not to accept the offer.If the second student does not accept the offer,the professor will take the bill back,but if he accepts the offer,the money will be divided in the ratio decided by the first student. a)What is the likely outcome of this game if both students value more money to less? b)What is the likely outcome of this game if the second student values fairness?

When does the second player in an ultimatum game reject the offer made by the first player?

Scenario: You are playing a game of "Friend or Foe?" You and your classmate are taken to two different rooms and asked to choose whether the other is a friend or foe. You are told that if both of you choose "friend," you will get $10 each. However, if both of you choose "foe," neither of you will get anything. If one of you chooses "friend" while the other chooses "foe," the one who chooses "foe" will get $20, while the one who chooses "friend" will get nothing. -Refer to the scenario above.Which of the following is true for this game in equilibrium?

An environmental protection agency in Natura has launched a campaign against the use of plastic bags.This is an example of ________.

The responder in an ultimatum game is likely to reject an offer of 10 percent of $1 but is less likely to reject an offer of 10 percent of $100.What is the reason behind such inconsistent behavior?

Scenario: Elly owns a small coffee shop. She has only one employee. One weekend, she decides to take a break from work. She is wondering whether she should trust her employee to run the shop in her absence. If she does not trust him, she would have to keep the shop closed, in which case neither she nor her employee will be able to make money. In contrast, if she trusts him, he can either cooperate and run the shop or he can defect and steal from the shop. If he cooperates, both of them will earn money. If he steals from the shop, he will make more money while she will lose. -Refer to the scenario above.Which of the following is likely to happen if Elly is known to be vengeful?

Jack refused to donate money for the building of a public park when he was contacted individually.However,he readily agreed to donate when he was asked to contribute for a similar cause in front of his neighbors.Such behavior is an example of ________.

Scenario: Your car broke down while you were driving to the office one morning. You took it to the nearest service center and were told by the mechanic that you need to pay $500 for the repair. You are uncertain about whether to trust him. If you do not trust him, you have to take it to another service center, which is far away and inconvenient. If you trust him, he can either cooperate or defect (do an honest job or not). If he does an honest job, both of you will gain from the trade. If he does not do an honest job, he will gain $500 while you will lose your money. Clearly, he will gain more by defecting rather than by cooperating with you. -Refer to the scenario above.Which of the following will happen in equilibrium?

Scenario: Jack and Jill are siblings. Jack's father asked him how much money he would offer Jill if he gives him $50 as pocket money. He also told Jack that if Jill refuses the offer Jack makes, neither of them will get any money. -Refer to the scenario above.A player should use ________ to play this game.

Why is the equilibrium in a trust game socially inefficient?

As more people in a country started hoarding grain in fear of a shortage,a shortage actually occurred.This is an example of ________.

John has been trying to find a job for the past 6 months.He went for an interview at Aqua Inc.Although his performance was better than that of all the other candidates,the interviewers rejected him.They thought that they must have missed something about him that other employers noticed,which made them not hire him.This is an example of ________.

Mark started taking guitar lessons when all his cousins started playing guitar.This is an example of ________.

Scenario: You walk onto a used car lot to buy a car. You are willing to pay up to $15,000 for a car of good quality, but you value a lemon at $0. You are now wondering whether you should trust the car dealer when it comes to the quality of his cars. If you choose to trust him, he can choose to cooperate or defect. If you do not trust him, he will not earn any money and you will not be able to buy a car. If you trust him and he cooperates, both of you will gain, because the dealer values a good-quality car at $13,000. However, if he defects, he will earn $15,000, while you will not derive any satisfaction. -Refer to the scenario above.Which of the following is true if the car dealer has a reputation for trustworthiness?

Scenario: Tom and Harry are participating in a game in which the participants are divided into groups of two. Tom and Harry have been put in the same group. In each round of the game, Tom will be given an item. Tom can either give it to Harry or pass it on to the next team. If he decides to pass it on to the next team, neither of them will get the prize. If he gives it to Harry, Harry can either pass it on to the next team or sell it himself. If he passes it on to the next team, each of them will get $100. However, if he decides to sell it, he will get an amount higher than $100 and Tom will get nothing. -Refer to the scenario above.Which of the following will be true if Harry is known to be trustworthy?

You are participating in a reality show in which you and several other competitors have been taken to an unknown place and asked to make your way to a destination using a map.You were doing a good job until you reached a crossroad.Confused as to which way to take,you decided to take the road that most of your competitors chose. a)What is the term that is used to refer to such behavior? b)Why do people often behave in this way?

Scenario: Catherine and Arthur are playing a game. They are put in two different rooms and asked to choose between two colors: black and white. If they both choose black, they will not get any money. If they both choose white, each of them will get $5. If one chooses white while the other chooses black, the one who chooses black will get $10 and the one who chooses white will get $0. -Refer to the scenario above.What will be the outcome of this game?

Mr.Smith wants to buy a house in a certain neighborhood that he thinks is ideal for an elderly,single man like himself.However,before buying the house,he consults a friend who lives in the same neighborhood.The information provided by his friend helps him conclude that the neighborhood is most ideal for him.This is an example of ________.

Under what circumstances will the equilibrium in a trust game be efficient?