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EXERCISE I (20 points) Use two decimals when needed in this exercise. The economy of Naboo has a population of 10 million people, of which 7 million are in the labor force. 3 million people work in the construction sector, 2 million people work in the services sector, 1 million people work in the IT sector, and 1 million people are unemployed. a) (7 POINTS) Assuming that the fraction of unemployed construction workers with respect to total number of unemployed people is the same as the fraction of employed construction workers with respect to the total population; and the fraction of unemployed service workers with respect to total number of unemployed people is the same as the fraction of employed service workers with respect to the total population, how many construction workers are unemployed? How many service sector workers? b) (8 POINTS) Calculate the unemployment rate for the construction sector in Naboo. Calculate the unemployment rate for the service sector in Naboo. c) (5 POINTS) Suppose that the construction sector faces reduced demand, and is forced to lay off 2 million workers. 1.5 million of them stay in the labor force, while .5 million, discouraged by the layoffs, exit the labor force. Calculate the unemployment rate in Naboo .6. Consider three players, each of whom have two strategies available to them where player 1's two strategies are A and B, player 2's two strategies are C and D, and player 3's two strategies are E and F. The payoffs associated with each possible combination of strategy choices are depicted in the following strategic form game, Game 4. Player 3 chooses E Player 2 C D A 5, -1, 3 3, 1, 1 Player 1 B -1, 5, 1 1, 2, 0 Player 3 chooses F Player 2 C D A 0, 6, 3 3, 0, 2 Player 1 B -1, 4, 0 1, 7, 0 Game 4 If you were to rewrite the strategic form for the above game with player 3 as the row player, player 1 as the column player, and player 2 as the third/page player, which of the following would represent the correct Nash equilibrium of the game. A. (A, C, F) B. (E, D, B) C. (F, A, C) D. (F, D, B) E. (C, B, E) 7. Assume that two telecom firms, Vodacom and MTN, are trying to determine their pricing strategies for the new iphone 7. Assume further that the two firms only have two pricing strategies: price Low or price High. Given that the two firms are selling an identical product, if they set the same price then they will split the market equally. However, if one sets a high price and the other sets a low price, the low- price firm will capture the entire market. Assume that if both firms set high prices, they each make R20 million. By contrast, if both firms set low prices then they each make R10 million. If one firm sets a high price and the other sets a low price, the low price firm earns R30 million and the high price firm earns RO.9. Consider the following graph representing a collective-action game, Collective- (ii (ii) (iii) (iv) M (vii Payoff Action Game 1I where n represents the number of participants and N represents the size of the population, as well as the corresponding statements numbered (i) - (vi). 1 480 420 4572 it Strategy 1 is equivalent to Shirk and Strategy 2 is equivalent to Participate, then Collective Action Game 1 is a Chicken Game. lf Strategy 2 is equivalent to Shirt: and Strategy 1 is equivalent to Participate. then Collective Action Game 1 is a Chicken Game. if Strategy 1 is equivalent to Shirk and Strategy 2 is equivalent to Participate, then Collective Action Game 1 is an Assurance Game. if Strategy 2 is equivalent to Shirk and Strategy 1 is equivalent to Participate. then Collective Action Game 1 is an Assurance Game. it Strategy 1 is equivalent to Shirk and Strategy 2 is equivalent to Participate, then Collective Action Game 1 is a Prisoner's Dilemma Game. if Strategy 2 is equivalent to Shirk and Strategy 1 is equivalent to Participate. then Collective Action Game 1 is a Prisoner's Dilemma Game. Which of the given statements regarding Collective-Action Game 1 are correct? A. (i) and (iv) are correct regarding Collective Action Game 1. B. (ii) and (iii) are sweet regarding Collective Action Game 1. C. (ii). (iii) and (vi) are correct regarding Collective Action Game 1. D. (i), {iv} and (v) are correct regarding Collective Action Game 1. E. None of the statements are correct regarding Collective Action Game 1. 10. Consider the following extensive form game, Game 6, as well as the corresponding statements numbered (i) - (v). Player 1 A B C Player 2 2 4 Player 2 H E F 3 Player 3 G Player 1 (25, 2, 2) (10,-1,3) (4,1,4) K L (4,0,6) (0,0,5) (4,1,10) (4,3,1) Game 6 Game 6 has 4 subgames. Game 6 has 5 subgames. 37333 Player 1's strategy set is {A,B,C,K,L} Player 1's strategy set is {AK,AL,BK,BL,CK,CL} Player 2's strategy set is {EF, GH}. Which of the above statements are true with respect to Game 6? Please note that in Game 6, players 1's payoff is listed first, player 2's payoff is listed second, and player 3's payoff is listed third. A. (i) B. (ii) C. (ii) and (iii) D. (ii) and (iv) E. (ii) and (v)Which of the following games best characterises the above strategic interaction? Hint: you can draw a game table depicting the above description in order to aid you in answering the question. A. Pure coordination game. B. Assurance game. C. Battle of the sexes game. D. Chicken game. E. Prisoners\" Dilemma. 3. Consider the following description of events. as well as the corresponding game table. Game 5. in order to answer the question. Each semester lecturers and students play a game in which lecturers are faced with the choice of either releasing tut memos or not releasing them and students can choose to either ask for them or not ask for them. The strategic interaction between lecturers and students is represented in the game table below. Don't release memo Release memo Request memo Eggigo' 50;: + son-p) . 50 Don't request _ Game 5 Which of the foilowing statements regarding the game above are most correct? (i) For lecturers, Release memo is a strictly dominant strategy for sit possible values of q. {ii} For students. Request memo is a strictiy dominant strategy for p =- 0.8. (iii) If p = 0.4 and q = 0.4, then the game becomes a prisoner's dilemma. (iv) lfp = 0.6 and q = 0. then the Nash equilibrium {Request memo, Release memo) is the socially optimal outcome. (v) {Request memo, Release memo} is always a Nash Equilibrium in this game. A. (ii. (iii and (v) E. (ii) only C. {ii} and (iv) D. {ii}, (iii) and (iv) E. (iv) and {v}