In the Ultimatum Game, Two Strangers Are Given $50 and Must

question 28

Multiple Choice

In the ultimatum game, two strangers are given $50 and must decide how to split the money between them. One player, called the proposer, makes the initial decision on how to split the money. The second player, called the responder, either accepts or rejects the proposer's offer. If the responder accepts the offer, both players are paid according to the proposer's offer. If the responder rejects the offer, neither player receives any money. Suppose the proposer and responder act in a rationally self-interested manner. The proposer would offer $____ to the responder and the responder would ____ the offer.

• A) 1; accept
• B) 1; reject
• C) 49; accept
• D) 49; reject

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Definitions:

Consumer's Income

The total amount of money earned by a consumer, influencing their purchasing power and spending behavior.

Equilibrium

A state of balance or stability within a system where opposing forces or influences are equal and cancel each other out.

Marginal Utility

The supplementary satisfaction or advantage received from consuming one more unit of a good or service.

Utility Maximization

An economic principle that suggests individuals seek to achieve the highest level of satisfaction possible with their available resources.