(See Problem 1

question 10

Multiple Choice

(See Problem 1.) Alice and Betsy are playing a game in which each can play either of two strategies, leave or stay. If both play the strategy leave, then each gets a payoff of $100. If both play the strategy stay, then each gets a payoff of $800. If one plays stay and the other plays leave, then the one who plays stay gets a payoff of $C and the one who plays leave gets a payoff of $D. When is the outcome where both play leave a Nash equilibrium?

• A) When D > C and C > $100.
• B) Never, since $800 > $100.
• C) When $100 > C and D > $800 but not when $800 >D.
• D) Whenever D < $800.
• E) Whenever $100 > C.

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Definitions:

Store Of Value

An asset that can be saved, retrieved, and exchanged in the future without depreciating in value.

Medium Of Exchange

Anything widely accepted as a tool for payment in the exchange of goods and services.

Commodity Money

Money that takes the form of a commodity with intrinsic value

Fiat Money

Money without intrinsic value that is used as money by government decree