s) What is the primary difference between a mixed strategy and a pure strategy?

Question

s) What is the primary difference between a mixed strategy and a pure strategy? A) Pure strategies are always dominated strategies B) Mixed strategies are not optimal whereas pure strategies are. C) Pure strategies are much more common than mixed strategies. D) Mixed strategies call for randomizing over possible actions, pure strategies do not 9) The term prisoners' dilemma refers to a game in which 9) A) there are no Nash equilibria. B) the payoff from both players playing their dominant strategies is not the highest payot possible. C) there are no dominant strategies D) the payoff from both players playing their dominant strategies is the same for each player. 10) The winner's curse occurs when 10) A) the winning bid is higher than the good's common value. B) the winning bid is higher than the private value of the good. C) the winner buys something he didn't need D) bidders "shade" their bids. 11) If an individual makes her investment decisions based solely on the Expected Value criterion, one 1) can conclude that she is A) risk loving. C) risk averse B) extremely wealthy D) risk neutral 12) People in a certain group have a 0.3% dance of dying this year. If a person in this group buys a life 12. insurance policy for $3,300 that pays $1,000,000 to her family if she dies this year and S0 otherwise, what is the expected value of a policy to the insurance company? A) $300 B) $3,000 C)s0 D) $3,300 13) A risk premium 13) A) is required to get a risk-neutral person to make a fair bet. B) is the maximum amount a decision-maker would pay to avoid taking a risk C) is the minimum amount a decision-maker would pay to avoid taking a risk D) is the maximum amount needed to compensate a decision-maker to willingly take a risk 14) 14) An increase in consumer incomes will lead to A) a rightward shift of the demand curve for plasma TVs B) no change of the demand curve for plasma TVs C) a rightward shift of the supply curve for plasma TVs. D) a movement upward along the demand curve for plasma TVs i5)- 15) Asymmetric information is where A) everyone has the same information. B) one person in a transaction has more information than the other. C) the information available to the people in a transaction is misleading or incomplete. D) people engaging in a transaction are uncertain about future events B-2

Explanation / Answer

Answer:-

8)

Mixed strategy is the one in which probability is distributed over all the possible pure strategies.

OPTION (D)

9)

The payoff from playing the dominant strategy is not the highest payoff possible.

OPTION (B)

10)

The winning bid is higher than the goods common value

OPTION (A)

11)

Risk-neutral person chooses the option with the highest expected value, because maximizing expected value maximizes utility.

OPTION (D)

12)

Prob of dying=0.30/100=0.003

Prob of not dying=1-0.003=0.997

Expected value=0.997(-3300) + 0.003(1,000,000-3300)

= 3290.1 – 2990.1

= 300

OPTION (A)

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