Economics Exam

Refer to Scenario 15-5. How much additional profit can the airline earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket? a. $15,000 b. $25,000 c. $40,000 d. $70,000

$15000

Refer to Table 22-22. If there is a vote between a budget of $12 million and $16 million, the median voter will vote to spend a. $12 million and the voting outcome will be $12 million. b. $12 million and the voting outcome will be $16 million. c. $16 million and the voting outcome will be $12 million. d. $16 million and the voting outcome will be $16 million.

$16 million and the voting outcome will be $16 million.

Refer to Table 22-22. If there is a vote between a budget of $16 million and $20 million and voter vote for the budget nearest their preferred budget, then the median voter will vote to spend a. $16 million and the voting outcome will be $16 million. b. $16 million and the voting outcome will be $20 million. c. $20 million and the voting outcome will be $20million. d. $20 million and the voting outcome will be $20 million.

$16 million and the voting outcome will be $16 million.

Leigh is one year away from retirement and is concerned that the social security system will be abolished this year. Leigh would like to have an annual income of $50,000 during retirement. How much does Leigh need to have invested at 3% to assure that annual income? A. $666,667 B. $1,666,667 C. $150,000 D. $2,666,667

$1666667

Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing price charged for goods produced is $12.The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. The socially efficient level of production is 12 units. The demand curve and marginal cost curves are linear. What is the value of the deadweight loss created by the monopolist? a. $4 b. $6 c. $12 d. $16

$6

Refer to Figure 14-1. In the short run, the firm's maximum profit (or minimum loss) is the same at which of the following pairs of prices? A. $65 and $75 B. $75 and $85 C. $80 and $100 D. $125 and $175

$65 and $75

Assume that a local restaurant sells two items, salads and steaks. The restaurant's only two customers on a particular day are Mr. Carnivore and Ms. Leafygreens. Mr. Carnivore is willing to pay $20 for a steak and $7 for a salad. Ms. Leafygreens is willing to pay only $8 for a steak, but is willing to pay $12 for a salad. Assume that the restaurant can provide each of these items at zero marginal cost. 53. Refer to Scenario 17-5. How much additional profit can the restaurant earn by switching to the use of a tying strategy to price salads and steaks rather than pricing these goods separately? a. $20 b. $12 c. $7 d. $6

$7

Refer to Figure 14-1. The firm will shut down in the short run if the price of the good is A. $75. B. $85. C. $95. D. All of the above are correct.

$75.

6. Assuming equipment costs $10 per unit and each worker earns $5, Average Variable Costs are minimized when output is approximately A. 3 units. B. 8 units. C. 11 units. D. 12 units.

11 Units.

Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1500 to Lane and $1000 to Riley. Irrespective of who pays for the paving both people will benefit from it. 40. What is the most a contractor can charge for paving the driveway and still be hired by at least one of them? A. $1000 B. $1500 C. $2000 D. $2500

1500

This game has __________ Nash equilibrium. A. 0. B. 1. C. 2. D. 4.

2

If the present value of $1000 next month is $970.87, the interest rate is A. 5%. B. 1%. C. 3%. D. 4%.

3%

If Candidate Y is running against Candidate Z, A. Candidate Y will have an incentive to move to the left, and Candidate Z will have an incentive to move to the right. B. Both candidates will have an incentive to move to the left. C. Both candidates will have an incentive to move toward each other's position. D. Neither candidate has any incentive to move.

Both candidates will have an incentive to move toward each other's position.

Suppose that there are just two firms in a small market. Acme Manufacturing's Total Costs equal $100 + $3QGeneric Industries' Total Costs equal $500 + $3Q (where Q = quantity of output for both firms). 23. Suppose that Acme and Generic face the same demand function, that they are both pursuing a profit maximization policy, and that both companies are earning positive economic profits at that quantity. Which statement is true? A. Acme will produce more output than Generic. B. Generic will produce more output than Acme. C. Acme and Generic will produce the same quantity and will have the same profits. D. Acme and Generic will produce the same quantity, but Acme will have higher profits.

Acme will produce more output than Generic.

Refer to Figure 14-1. In the long run, the firm will exit the market if the price of the good is A. $75. B. $85. C. $95. D. All of the above are correct.

All of the above are correct.

Refer to Table 17-29. Which of the following statements does not correctly characterize the outcome of this game? a. There is a Nash equilibrium. b. Only one firm has a dominant strategy. c. The game is an example of the Prisoners' Dilemma. d. Both firms collectively would earn the highest joint profits by maintaining the agreement not to advertise.

Both firms collectively would earn the highest joint profits by maintaining the agreement not to advertise.

The equilibrium for this game is for Lee to choose _______ and for Cody to be _______ in response. A. aggression; cooperative B. aggression; aggressive C. cooperation; cooperative D. cooperation; aggressive

Cooperation; Cooperative.

Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm a. must lie entirely above the average total cost curve. b. must lie entirely below the average total cost curve. c. must be upward sloping. d. does not exist.

Does not exist.

Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs $5 million per well. If each company drills one well, each will get half of the oil and earn a $67 million profit ($72 million in revenue - $5 million in costs). Assume that having X percent of the total wells means that a company will collect X percent of the total revenue. 52. Refer to Scenario 17-2. Exxoff's dominant strategy would lead to what sort of well-drilling behavior? a. Exxoff will never drill a second well. b. Exxoff will always drill a second well. c. Exxoff will drill a second well only if BQ drills a well. d. Exxoff will drill a second well only if BQ does not drill a well.

Exxoff will always drill a second well.

On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric companies may ask people to voluntarily cut back on their use of electricity. An economist would suggest that a. every electric customer has an incentive to prevent the system from overloading, so this voluntary approach is the most efficient. b. it would be more efficient if the electric company raised its rates for electricity at peak times. c. it would be more efficient to have a lottery to decide who had to cut back their use of electricity at peak times. d. it would be more efficient to force everyone to cut their usage of electricity by the same amount.

It would be more efficient if the electric company raised its rates for electricity at peak times.

Relative to costs when equipment cost $10, if the price of equipment increased to $20 and nothing else changed, A. Total Cost would increase by $10 per unit of output. B. Marginal Cost would increase by $20 divided by units of output. C. Marginal Cost would not change. D. Average Total cost would increase by $10 at each level of output.

Marginal cost would not change.

24. Refer to the figure above. The firm illustrated in the graph is a(n) A. oligopolist. B. monopolistic competitor. C. perfect competitor. D. natural monopolist.

Natural monopolist.

Suppose there are two small island countries: Avarice, which is populated by people who are completely self-interested and Altruism, which is populated by people who have adopted social norms of generosity and cooperation. If two residents of Avarice play the Prisoner's Dilemma game, they are likely to A. never reach the Nash Equilibrium B. reach the Nash Equilibrium more often than would residents of Altruism. C. reach the Nash Equilibrium less often than would residents of Altruism. D. play their dominated strategies more often than would residents of Altruism.

Play their dominated strategies more often than would residents of altruism.

If someone informs a sales clerk that he was given $20 in change when he was only owed $10, one can conclude, A. the individual is irrational. B. preferences to be honest altered his motivation and choice. C. the individual is wealthy. D. somebody else must have witnessed the error.

Preferences to be honest altered his motivation and choice.

In its efforts to keep medical costs down, the government has decided to impose a $15 price ceiling on a weekly dose of this drug. What is likely to happen? A. The firm will produce 400 doses per week causing excess supply of this drug on the market. B. This drug will disappear from the market. C. The firm will produce 325 doses per week, just meeting consumer demand. D. The firm will produce 200 doses per week, the quantity at which price equals Marginal Cost.

The firm will produce 325 doses per week, just meeting consumer demand.

If nations such as Germany, Japan, and the United States prohibited international trade in automobiles, a likely effect would be that a. the price effect would become a more significant consideration for each firm that makes automobiles. b. the excess of price over marginal cost would become less pronounced in the automobile market. c. all countries would become better off. d. automobile producers in the U.S. would collude to produce a large number of cars.

The price effect would become a more significant consideration for each firm that makes automobiles.

When a monopolist reduces the quantity of output it produces and sells, A. the price of its output increases. B. the price of its output remains constant. C. the price of its output decreases. D. the profits for the firm always decrease.

The price of its output increases.

Suppose Emilio offers you $500 today or $X in 10 years. If the interest rate is 6 percent, then at what value of X would you be indifferent between the two options? a. X = 809.33 b. X = 855.56 c. X = 895.42 d. X = 916.74

X=895.42

A risk-averse person has a. utility and marginal utility curves that slope upward. b. utility and marginal utility curves that slope downward. c. a utility curve that slopes down and a marginal utility curve that slopes upward. d. a utility curve that slopes upward and a marginal utility curve that slopes downward.

a utility curve that slopes upward and a marginal utility curve that slopes downward.

Assuming Lee is self-interested and believes Jordan is as well, if Lee knows that Jordan bought a ticket first, Lee will A. be indifferent between the two movies. B. buy a ticket to the comedy. C. flip a coin. D. buy a ticket to the documentary.

buy a ticket to the comedy.

Refer to Figure 14-1. Suppose the price of the good is $175. If the firm produces and sells 515 units of output, its total revenue is A. $100,525. B. $90,125. C. $84,500. D. $75,250.

$90,$125

A firm's total profit equals A. Marginal Benefit minus Marginal Cost. B. (Price minus Average Total Cost) times the quantity sold. C. Price times Quantity Sold D. Price minus Average Total Cost.

(Price minus average total cost) times the quantity sold.

Competitive firms differ from monopolies in which of the following ways? (i) Competitive firms do not have to worry about the price effect lowering their total revenue. (ii) Marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price it is able to charge. (iii) Monopolies must lower their price in order to sell more of their product, while competitive firms do not. a. (i) and (ii) only b. (ii) and (iii) only c. (i) and (iii) only d. (i), (ii), and (iii)

(i) (ii) (iii)

What causes the Tragedy of the Commons? (i) Social and private incentives differ. (ii) Common resources are not rival in consumption and are not excludable. (iii) Common resources are not excludable but are rival in consumption. a. (i) only b. (ii) only c. (i) and (ii) only d. (i) and (iii) only

(i) and (iii) only.

The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul). 54. Refer to Table 17-21. How many Nash equilibria are there in this Chicken game? a. 0 b. 1 c. 2 d. 3

2

Suppose residents of each island often play prisoner's dilemma games, always matched with a person from the same island, but not a person who they know or will play with again. If the same number of games is played, you would expect that A. Avarice players will have higher average payoffs than Altruism players. B. players on both islands will quickly converge to playing the Nash Equilibrium all of the time. C. Altruism players will have higher average payoffs than Avarice players. D. players on both islands will quickly converge to the higher-payoff non Nash Equilibrium result.

Altruism players will have higher average payoffs than Avarice players.

Refer to Figure 11-1. Which of the following items is not an example of the type of good represented by Box D? a. a mathematical theorem b. an uncongested toll road c. national defense d. fighting poverty

An uncongested toll road.

Which of the following is an example of the free-rider problem? a. Both Zoe and Zach receive low-cost dental care at the local dental school, so neither of them pays the full cost of the care. b. Alfred receives a free lunch from the local "Meals on Wheels" program because of his low monthly income. Yet his next door neighbor, Alice, is not eligible for the free lunch. c. Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking. d. Sam purchases a burger at a fast food restaurant and gets a second burger free because the restaurant is having a buy one, get one free sale.

Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking.

For a firm, marginal revenue minus marginal cost is equal to A. profit. B. average total cost. C. change in profit. D. change in average revenue.

Change in profit.

A stairwell in a certain office building is always congested at 12:00 p.m. and 1:00 p.m. The congestion is so bad that people have been complaining to the building's owner. Which of the following methods would be the most efficient way of reducing congestion? a. Assign each person in the building a time when they are allowed to use the stairwell. b. Encourage people to voluntarily keep off the stairwell during peak times. c. Charge everyone who uses the stairwell when it is congested the same fee. People who value the use of the stairs the most will be the ones who use the stairwell at peak times. d. Hold a lottery to determine who wins the right to use the stairwell at peak times.

Charge everyone who uses the stairwell when it is congested the same fee. People who value the use of the stairs the most will be the ones who use the stairwell at peak times.

If Lee is aggressive, Cody will respond with ______ and if Lee cooperates, Cody will respond with ____. A. Aggression; Cooperation B. Aggression; Aggression C. Cooperation; Aggression D. Cooperation; Cooperation

Cooperation; Aggression

Refer to Figure 27-5. From the appearance of the graph, we know that a. Dexter's level of satisfaction increases by more when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001. b. Dexter's level of satisfaction increases by less when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001. c. Dexter's level of satisfaction increases by the same amount when his wealth increases from $1,001 to $1,002 as it does when his wealth increases from $1,000 to $1,001. d. None of the above answers can be inferred from the appearance of the utility function.

Dexter's level of satisfaction increases by more when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001.

Suppose the cost of paving the driveway is $2000, it is _____ for them to share its cost, because then they will have a total economic _______. A. inefficient; shortage of $500 B. efficient; surplus of $500 C. efficient; shortage of $500 D. efficient; surplus of $1000

Efficient; surplus of $500

Suppose Lee and Cody enter into a binding non-aggression agreement. As part of that agreement they negotiate a fine that Cody would have to pay to Lee if Cody responded to Lee's passive choice with aggression. For that fine to be effective, it must be A. less than 15 B. greater than 15 C. equal to 40 D. equal to 25.

Equal to 40.

For this firm, Marginal Cost A. equals Average Variable Cost at Average Variable Cost's minimum point. B. equals Average Total Cost at Average Total Cost's maximum point. C. is always greater than Average Variable Cost. D. is always less than Average Variable Cost.

Equals average variable cost at average variable cost's minimum point.

Jenny sells lemonade by the street during the summer time. Several other kids also sell lemonade in Jenny's neighborhood. 3. Suppose that the first week of summer, Jenny charged 25 cents for an 8-ounce cup of lemonade, her next-door neighbor Sam charged 50 cents for an 8-ounce cup of lemonade, and Alex across the street charged 15 cents for an 8-ounce cup of lemonade. What is most likely to happen? A. Everyone will start to charge 50 cents to maximize revenue. B. A price war will break out, and all of the kids will gradually increase their prices. C. Each kid will keep his or her price at the original amount, because they had chosen those prices to maximize profits. D. Eventually prices will equalize at all three lemonade stands.

Eventually prices will equalize at all three lemonade stands.

To produce 150 units of output, the firm must use 3 employee-hours. To produce 300 units of output the firm must use 8 employee-hours. Apparently, the firm is A. in the long run. B. experiencing diminishing marginal returns. C. not using any fixed factors of production. D. failing to profit maximize.

Experiencing diminishing marginal returns.

The lemonade stands are perfectly competitive because A. the kids get their ingredients from home and don't have to pay for them. B. it is easy to open a stand and easy to close it down. C. the table, cups and lemonade pitchers used in the stands are productive resources that are only useful for lemonade stands. D. the kids do not have regular jobs, so their opportunity costs are zero.

It is easy to open a stand and easy to close it down.

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways? a. A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. b. A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost. c. For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output. d. For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist.

For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output.

Suppose a firm increases its labor usage and office space (the only inputs used) by 10% and observes a 13% increase in output. The firm has A. increasing returns to scale. B. constant returns to scale. C. violated the law of diminishing marginal returns. D. increased its average costs.

Increasing returns to scale.

When the Water Authority in Townsville cuts cost by $1000, the government cuts its budget by $1000. The most likely reason for this is, that _______ A. it is a natural monopoly B. it is a state-owned natural monopoly C. it is a private natural monopoly D. its marginal cost is always greater than its average total cost

It is a state owned natural monopoly.

Which of the following is NOT a difference between monopolies and perfectly competitive markets? A. Monopolies can earn profits in the long run while perfectly competitive firms break even. B. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost. C. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not. D. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.

Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

Relative to the two-person scenario described, if a large number of people share the driveway, the joint purchase of paving is_______ and the ________ emerges. A. impossible; tragedy of the commons B. less costly; maximum economic efficiency C. more likely to be accomplished; free-rider problem D. more difficult; free-rider problem

More difficult; free rider problem.

Refer to Figure 14-1. Let Q represent the quantity of output and suppose the price of the good is $125. If this firm is in a perfectly competitive market, then A. marginal revenue is $80 at Q = 270. B. marginal revenue is $100 at Q = 322. C. marginal revenue is $175 at Q = 515. D. None of the above is correct.

None of the above is correct.

If Candidate X is running against Candidate Z, by moving to the right Candidate X would A. lose some votes from the far left but gain approximately the same number of votes from Z. B. not lose any votes from the left and gain some from Z. C. force Z to move farther to the right in order to keep the same number of votes. D. win the election if the move placed X anywhere to the right of the 25 mark on the spectrum.

Not lose any votes from the left and gain some from Z.

You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3: receive $2,000 five years from now. The interest rate is 15 percent. Rank these three options from highest present value to lowest present value. a. Option 1; Option 2; Option 3 b. Option 3; Option 2; Option 1 c. Option 2; Option 3; Option 1 d. Option 3; Option 1; Option 2

Option 2; Option 3; Option 1

Suppose a firm is collecting $100 in total revenues when it sells 10 units and it receives $110 in total revenues when it sells 11 units. The firm is a(n) A. pure monopolist. B. oligopolist. C. monopolistic competitor. D. perfect competitor.

Perfect competitor.

Which ordering best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the product? The market demand function will shift to the right causing the market A. price to increase, and a new stable equilibrium to be established at a higher price and higher quantity. B. price to increase, and all firms in the industry will earn higher profits at lower quantities of output. C. price to increase. Increased profits will encourage new firms to enter shifting the market supply function to the right. Long-run market equilibrium will be at a higher quantity but at the same price as before the surge in popularity. D. price and quantity supplied to increase. Increased profits will encourage new firms to enter shifting the market supply function upward. Long-run market equilibrium will be at a higher quantity and higher price than before the surge in popularity.

Price to increase. Increased profits will encourage new firms to enter shifting the market supply function to the right. Long-run market equilibrium will be at a higher quantity at the same price as before the surge in popularity.

Refer to the figure above. When the demand is P2 = $15, this firm should ______ A. continue to operate in the short run and think about shutting down in the long run B. discontinue operation in the short run since there is a loss when operating. C. keep operating as long as loss is not greater than total cost D. discontinue operation in the short run since average total cost is greater than price.

Refer to the figure above. When the demand is P2 = $15, this firm should ______A. continue to operate in the short run and think about shutting down in the long run B. discontinue operation in the short run since there is a loss when operating. C. keep operating as long as loss is not greater than total cost D. discontinue operation in the short run since average total cost is greater than price. Continue to operate in the short run and think about shutting down in the long run.

Which of the following is not correct? a. An example of adverse selection is man who tries to sell his used car without disclosing that it needs a new transmission. b. The "invisible hand" of a free market will always fix the problems of adverse selection and moral hazard. c. An employer may try to prevent a moral hazard problem by paying her workers an efficiency wage. d. One interpretation of gift giving is that it reflects asymmetric information and signaling.

The "invisible hand" of a free market will always fix the problems of adverse selection and moral hazard.

Assume that the market is currently as shown in the graph on the left (i.e., price of $8). What is true of the number of firms? A. There are currently 30 firms in the industry, and that number will remain stable until there is a change in demand or in technology. B. There are currently ten firms in this industry, and that number will remain stable until there is a change in demand or in technology. C. It is impossible to tell how many firms currently exist in this industry, but you can tell that the number of firms is likely to increase in the near future. D. There are currently ten firms in this industry, and that number is likely to increase in the near future.

The are currently ten firms in this industry, and that number is likely to increase in the near future.

Which of the following statements is correct? a. The benefits that accrue to a monopoly's owners are equal to the costs that are incurred by consumers of that firm's product. b. The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity. c. The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product. d. The primary social problem caused by monopoly is monopoly profit.

The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product.

Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by A. decreases in production costs resulting from more firms coming into the market. B. a breakdown of the "free entry and exit" feature of competition. C. a breakdown of the "price taking" feature of competition. D. the fact that a resource used in the production of the good is available only in limited quantities.

The fact that a resource used in the production of the good is available only in limited quantities.

One source of friction in the governmental provision of a pure public good is that voters receive __________ of the public good and have __________ for the public good. A. different amounts; different reservation prices B. different amounts; the same reservation price C. the same amount; different reservation prices D. the same amount; the same reservation price

The same amount; different reservation prices.

18. Suppose you quit your job to start a business. In the first month, your total revenue was $6,000. You paid $1,000 in monthly rent for office space. $ 200 in monthly rent for equipment. $3,000 to your workers in wages for the month. $1,000 for the supplies you used that month. You determine that your true profit that month was negative $200. Why? A. You did the math incorrectly. B. You accounted for lost salary of $200. C. You accounted for lost salary of $1000. D. Your equipment rent is an implicit cost.

You accounted for a lost salary of $1000.

You have been promised a payment of $100,000 in the future. In which case is the present value of this future payment highest? A. You receive the payment 2 years from now and the interest rate is 6 percent. B. You receive the payment 2 years from now and the interest rate is 4 percent. C. You receive the payment 3 years from now and the interest rate is 6 percent. D. You receive the payment 3 years from now and the interest rate is 4 percent.

You receive the payment 2 years from now and the interest rate is 4 percent.

Suppose Cody tells Lee that any aggression on Lee's part will be met with aggression, but that if Lee cooperates, Cody will respond cooperatively. Cody's statement is A. a commitment device. B. a non-credible threat and promise. C. a description of the two equilibria for this game. D. a credible threat and promise.

a credible threat and promise.

Robert and Neal are playing the ultimatum game starting with $100. Based on the coin toss, Robert is the player to propose a division of the $100. If Robert acts as economic theory assumes and Neal acts as experimental evidence shows, Neal will A. accept Robert's proposal of keeping $99 and offering Neal $1. B. accept Robert's proposal of keeping $60 and offering Neal $40. C. reject Robert's proposal of keeping $99 and offering Neal $1. D. reject Robert's proposal of keeping $60 and offering Neal $40.

reject Robert's proposal of keeping $99 and offering Neal $1.