Question

Consider an ultimatum game, in which the Proposer gets $100 and offers a portion of it to the Responder, who can either accept or reject. If the Responder accepts, both keep the agreed share, while if he rejects, then both receive nothing. Which of the following statements is correct?

a)The Responder's payoff is greater when they reject $20 than when they accept $20?

b)Economic experiments show the responders are motivated entirely by self-interest

c)It is never in the proposer's self-interest to make an offer greater than $1

d)If a second responder is added to the game, the 1st responder is more likely to accepta low offer

e)Non of the above

A price-setting firm chooses a price that ensures all of the following except:

a)Profits are maximized.

b)Allocation is efficient

c)Firm earns monopoly rents

d)Marginal Revenue = Marginal Cost

e)Demand curve is tangent to the isoprofit curve

Answer 1

Ans. 1. B. Economic experiments show that responders are entirely motivated by self interests . - This is the correct option.

2. E. Demand curve is tangent to the isoprofit curve. - This is not taken in consideration while setting prices.

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