Federal Reserve Bank of Boston Economic Quiz
1. The branch of economics known as game theory:
Concerns the strategic interaction of players with competing preferences.
Is younger than Fed Chairman Alan Greenspan.
Has been applied to problems in labor markets, evolutionary biology, and education.
All of the above
2. Assume everyone taking this quiz (including yourself) is choosing a number between 0 and 99. The goal is to choose the number equal to 2/3 of the average of all of the numbers chosen. If all players including yourself are fully rational, what is the correct number you should choose?
3. In a second-price auction (in which the highest bidder gets the object and pays the second highest price), what strategy gives a player the highest expected payoff regardless of his opponent’s bidding strategy, assuming he values the object at $99? (Game theorists refer to such a strategy as “dominant”).
Bidding exactly his valuation of the object.
Slightly shaving his bid to save a little.
Slightly overbidding to have a better chance of winning.
Not bidding at all – no one benefits from auctions except the auctioneer.
4. In his 2001 Nobel Prize winning economic research, Michael Spence emphasizes the purpose of education is to:
Enlighten and expand curious young minds.
Increase labor productivity in the long run.
Signal an individual worker’s productivity to an employer.
Raise income levels and reduce poverty.
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Economic quiz written by: Kristen George - July 1, 2002
Views expressed in the economic quiz are those of the individual author.