The Following Payoff Matrix Shows the Outcomes for the US

question 57

Multiple Choice

The following payoff matrix shows the outcomes for the US and the USSR from relying on conventional weapons or atomic weapons.The percentages refer to the fraction of the population that would die if a war occurred under the two weapons strategies.Assume the payoff matrix is for 1945,shortly after the US had demonstrated the effectiveness of the atomic bomb in World War II,i.e. ,the example begins in the upper right cell where USA has atomic weapons and the USSR has only conventional weapons. $\begin{array}{c}\text { USSR }\\\text { USA }\begin{array}{|l|l|l|}\hline &{\text { Atomic Weapona }} & {\text { Conventional }} \\\hline \text { Atomis}& \text { In the USA, } 60 \% \text { would die, } & \text { In the USA S\% would die, } \\ \text { Wespons}&\text { In the USSR, } 60 \% \text { would die } & \text { In the USSR, } 90 \% \text { would die } \\\hline \text { Conventional}&\text { In the USA, } 90 \% \text { would die; } & \text { In the USA } 10 \% \text { would dies } \\&\text { In the USSR, } 5 \% \text { would die } & \text { In the USSR, } 10 \% \text { would die. } \\\hline\end{array}\end{array}$
Refer to the information given above.As a result of the positional externality in this game:

• A) both countries are worse off.
• B) the United States is better off but the USSR is worse off.
• C) the United States is worse off and the USSR is better off.
• D) both countries are better off.

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Definitions:

Jensen's Measure

A metric used to evaluate the performance of an investment portfolio, considering both the risk-adjusted return and the portfolio's expected return based on market risk.

Market Portfolio

A theoretical bundle of investments that represents a segment of the overall market, typically used in the Capital Asset Pricing Model.

Sharpe Measure

A risk-adjusted performance metric that evaluates the return of an investment compared to its risk, with a higher Sharpe ratio indicating better risk-adjusted returns.

Beta

A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole, with a value greater than 1 indicating higher risk and a value less than 1 indicating lower risk.