Scenario: Catherine and Arthur Are Playing a Game

question 98

Multiple Choice

Scenario: Catherine and Arthur are playing a game. They are put in two different rooms and asked to choose between two colors: black and white. If they both choose black, they will not get any money. If they both choose white, each of them will get $5. If one chooses white while the other chooses black, the one who chooses black will get $10 and the one who chooses white will get $0.
-Refer to the scenario above.What will be the outcome of this game?

• A) Both players will choose black.
• B) Both players will choose white.
• C) Arthur will choose white, and Catherine will choose black.
• D) Catherine will choose white, and Arthur will choose black.

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Definitions:

External Cost

A cost that is not borne by the parties to an economic transaction, often affecting third parties who did not choose to incur that cost.

Social Cost

The total cost to society as a whole due to an activity or decision, including both direct costs and indirect externalities.

Congested Highway

A highway or roadway that experiences traffic congestion due to a high volume of vehicles, often leading to slower speeds and longer travel times.

Negative Externality

A cost that affects a party who did not choose to incur that cost, often arising from production or consumption of goods and services.