Question 5 What is correct about a dominant strategy?

options:

a. All games have a dominant strategy

b. In Nash equilibrium outcome both players must be giving their dominant strategy

c. Whether a strategy is dominant or not depends on other players' decisions

d. A dominant strategy always beats other strategies

Question 6In which of the situations is negative externality present in your action?

options:

a. Although plastic bags are free, you choose to carry your own shopping bag.

b. You watch a movie in the midnight and the sound and light disturb your roommate

c. You remember to wear a mask each time you go out.

d. You paid $10 to your roommate for using his bicycle.

Question 7 What are some possible ways to deal with a negative externality? (Select all right answers, no partial credit.)

options:

a. Subsidizing the behaviour that generates externality

b. Taxation

c. Regulations on do's and dont's and penalty when rules are broken

d. Issuing a certain number of permits and allowing the permit holders to trade

Question 8 Suppose a factory emits pollutants during the production process. Now suppose the government charges a unit tax on each unit of output produced. Which of the following is true?

options:

a. The social surplus will go down because of a tax

b. The supply curve of this product will shift downward

c. The market output will fall

d. The demand curve of this product will shift downward