Pat and Chris Are Vying for Jordan's Heart,and Both Value

question 88

Multiple Choice

Pat and Chris are vying for Jordan's heart,and both value winning Jordan's affection at $500.Jordan will choose between them based solely on which one spends the most money on gifts,movies,dinner and other enticements.Pat and Chris are fully aware of each other and of each other's spending.Spending must be in increments of $1 or more.
Pat thinks that there is a 50% chance that Chris will continue to spend more on Jordan regardless of the current level of spending.Suppose that Pat has now spent $250 on Jordan and Chris has spent $251.If Pat were to increase spending to $252 the marginal cost of that expenditure would be ___ while the expected marginal benefit is ____.

• A)$252;$250
• B)$2;$250
• C)$250;$250
• D)$250;$500

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Definitions:

Policy Fairness

The extent to which a policy is considered just, equitable, and unbiased towards individuals or groups affected by it.

Model Assumptions

Fundamental suppositions upon which economic models and theories are based to simplify reality and facilitate analysis.

Curve Shift

A change in the position of a curve on a graph, indicating a shift in the relationship between two variables.

Movement Along

Refers to a change in the quantity demanded or supplied of a good due to a change in its price, leading to movement along the demand or supply curve.