Is the following statement true or false? Explain.

Q1: Consider a game with two players: Mark and Luke. Each player can choose one of two strategies: Left and right. If the two players coordinate their choices, either left or right, they both earn $3. If the two players don't coordinate their choices, they both earn nothing. The equilibria of the simultaneous game coincides with the equilibria of the sequential game.

Compute the following exercise.

Q2: Andrew has the following utility function: U(x,y) = (2x^2)*(y^3). Px = 4, Py = 2. Income = 100. 1) What's its budget constraint and its budget line? Plot a graph. 2) Given his budget and these market prices, what is the optimal choice of x and y? Represent on the graph and denote the optimal basket with "A", and sketch also the indifference curve through "A". 3) Suppose the price of good x changes to Px=2. What's the new budget line? What's the new optimal choice? Draw them on the graph and denote it with "B". 4) Illustrate graphically the income and substitution effect of this price change on Andrew's consumption of x. Label clearly the relevant information. Is "x" a normal or an inferior good?

Answer rating: 100% (QA)

Question 1 Simultaneous game tuke Mark L L 93 00 R 00 3... View the full answer