A Small Community Has 10 People, Each of Whom Has

question 24

Multiple Choice

A small community has 10 people, each of whom has a wealth of $2,000.Each individual must choose whether to contribute $100 or $0 to the support of public entertainment for their community.The money value of the benefit that a person gets from this public entertainment is .65 times the total amount of money contributed by individuals in the community.

• A)This game has a dominant strategy equilibrium in which all 10 citizens contribute $100 to support public entertainment.
• B)This game has two Nash equilibria, one in which everybody contributes $100 and one in which nobody contributes $100.
• C)This game has no Nash equilibrium in pure strategies, but has a Nash equilibrium in mixed strategies.
• D)This game has a Nash equilibrium in which 5 people contribute $100 and for public entertainment and 5 people contribute nothing.
• E)This game has a dominant strategy equilibrium in which nobody contributes anything for public entertainment.

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Definitions:

Average Cost

A method to determine the cost basis of investments by averaging the purchase price of all the shares.

Capital

Funds or resources that individuals or businesses use to invest in assets or operations with the goal of generating income or profit.

Free Cash Flow Valuation Approach

A method of valuing a business by estimating the cash that can be generated after accounting for capital outlays necessary to maintain or expand the asset base.

Present Value

A calculation that determines the current worth of a future sum of money or stream of cash flows given a specified rate of return.