1.Which of the following statements are true? a) In a two-person partnership if both partners are altruistic, they will produce less efficiently than if they were to maximise their own preferences. b) An individual who cares how her contributions affect outcomes and whose contributions are relatively small will generally contribute to only one charity. c) An individual who cares how her contributions affect outcomes and whose contributions are relatively small will generally contribute to several charities to make sure she has an impact. d) Consider an ultimatum game where one player offers a split of 10 pounds (has to offer the other player at least 0.01 pounds). When both players maximise only their own utility, the equilibrium has the first player offering 4 pounds to the other. e) Consider an ultimatum game where one player offers a split of 10 pounds (has to offer the other player at least 0.01 pounds). When both players maximise only their own utility, the equilibrium has the first player offering 0.01 pounds to the other. f) Consider an ultimatum game where one player offers a split of 10 pounds (has to offer the other player at least 0.01 pounds). When both players maximise only their own utility, the responding player should not accept an offer of 0.01 pounds.

2.Imagine the following market for used cars: There are 1000 sellers of used cars and 1000 buyers. 500 cars are good, 500 cars are lemons (bad cars). The following table shows you how much sellers and buyers value the different cars(check image). Which of the following statements are true? a) If all the sellers show up to the market sell their cars, without knowing the type of the car, the buyer would be willing to buy a car when the price is 2000. b) If all the sellers show up to the market sell their cars, without knowing the type of the car, the buyer would be willing to buy the car when the price is 1580. c) There is an equilibrium in which all the sellers come to the market and they all sell their cars. d) There is an equilibrium in which just the sellers with the good cars come to the market and sell all their cars. e) There is an equilibrium in which just the sellers with the bad cars come to the market and sell all their cars. f) If buyers could tell if the car was good or bad, there is an equilibrium in which all cars are sold.

Seller willing to sell if Buyer willing to buy the price is above: if the price is below: Good car 2000 2400 Bad car 1000 1200