Two Partners Start a Business

question 21

Multiple Choice

Two partners start a business.Each has two possible strategies, spend full time or secretly take a second job and spend only part time on the business.Any profits that the business makes will be split equally between the two partners, regardless of whether they work full time or part time for the business.If a partner takes a second job, he will earn $80,000 from this job plus his share of profits from the business.If he spends full time on the business, his only source of income is his share of profits from this business.If both partners spend full time on the business, total profits will be $200,000.If one partner spends full time on the business and the other takes a second job, the business profits will be $80,000.If both partners take second job, the total business profits are $20,000.

• A)In the only Nash equilibrium for this game, both partners earn $100,000.
• B)In the only Nash equilibrium for this game, one partner earns $120,000 and the other earns $40,000.
• C)In the only Nash equilibrium for this game, both partners earn $90,000.
• D)This game has two Nash equilibria, one in which each partner has an income of $100,000 and one in which each partner has an income of $90,000.
• E)This game has no pure strategy Nash equilibria, but has a mixed strategy equilibrium.

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Definitions:

Charles Darwin

A 19th-century naturalist best known for his contributions to the science of evolution and his proposal of natural selection as a mechanism for evolutionary change.

Natural Selection

The process by which biological traits become either more or less common in a population due to the effect on the survival and reproduction of individuals.

Divine Creator

A supreme being believed to be responsible for the creation of the universe and life within it.

Argument From Design

The Argument from Design is a philosophical argument for the existence of God, suggesting that the universe's complexity and order imply a designer.