Two Partners Start a Business

question 5

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 $10,000 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)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 $20,000.
• B)In the only Nash equilibrium for this game, both partners earn $20,000.
• C)In the only Nash equilibrium for this game, one partner earns $50,000 and the other earns $40,000.
• D)In the only Nash equilibrium for this game, both partners earn $100,000.
• E)This game has no pure strategy Nash equilibria, but has a mixed strategy equilibrium.

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Definitions:

Vision

The ability to see; the sense that allows organisms to detect light and perceive the colors, shapes, and depths of their surroundings.

Sensation

Sensation is the process by which sensory receptors and the nervous system receive and interpret stimuli from the environment, such as light, sound, and touch.

Perception

Perception is the process by which organisms interpret and organize sensory information to produce a meaningful experience of the world.

Interpretation

The act of explaining the meaning of something; in the context of data, it involves determining the significance or implications of the information presented.