Use the Following to Answer Questions

question 101

Multiple Choice

Use the following to answer questions :
Scenario I
The scenario describes research findings discussed in the following review article:
Cameron,C.C. ,& Thaler,R.H.(1995) .Anomalies: Ultimatums,dictators,and manners.Journal of Economic Perspectives,9(19) ,209-219.
In the ultimatum game,two participants are assigned to be either the "Divider" or the "Decider" by a coin flip.The Divider is given a sum of money,such as $10,and is instructed to offer some nonzero portion of it to the Decider.If the Decider accepts,she gets to keep what was offered and the Divider keeps the rest.If the Decider rejects the deal,both players get nothing.Both players are made aware of all these rules and then the game begins.Under these conditions,Dividers usually offer a little less than $5 and Deciders usually accept this amount.If Dividers offer less,Deciders often reject and both players get nothing.A similar game is termed the dictator game.Players are randomly assigned to be either the "Allocator" or the "Receiver." The Allocator is given a sum of money and makes a decision about how much money she would like to give the Receiver,who must accept this result.Allocators in this game usually offer some money to the Receiver but typically less than they offer the Dividers in the ultimatum game.
-(Scenario I) Replications of the ultimatum game with larger pots of money found similar results to the original studies.Which real-world anecdote is consistent with results from a large-stakes ultimatum game?

• A)As the economic magnitude of a sale increases,the seller is more likely to adopt a door-in-the-face technique and begin with a high sticker price before negotiating a fair price.
• B)A home seller would rather foreclose and lose everything than accept a low-ball offer from a buyer.
• C)Credit card companies vary interest rates and credit limits based on the risk associated with the credit applicant.
• D)Rather than risk not being signed by another team as a free agent,a veteran hockey player accepts a below-league-average salary to remain with his team.

---

Definitions:

Accounting Profits

The net income of a company calculated by subtracting total expenses from total revenues, following accounting rules.

Natural Monopoly

A market condition where due to high fixed costs or unique resources, a single firm can supply a product or service at a lower cost than any potential competitor, thus dominating the market.

Natural Monopoly

A market situation where a single supplier is most efficient in providing goods or services due to the high fixed or startup costs relative to the size of the market.

Per-unit Cost

The cost associated with producing a single unit of a product, including all variable and fixed costs divided by the total output.