Microeconomic models are used to

Assume that in a price-fixing game, if Player A breaks the agreement in the first year, she earns $11 while Player B earns $5 . However, if Player A breaks the agreement once, Player B decides to break the agreement for eternity, leaving each to receive $8 per year for the rest of their lives. If they both keep the agreement each receives $9 per year for the rest of their lives. If the discount

rate is 30 percent per period: a. Player A will prefer to break the agreement in the first year. b. Player A will prefer to break the agreement in the second year. c. Player A will prefer to keep the agreement throughout her life. d. Player A will prefer to keep the agreement only for the first five years.

Suppose you are seeking a real wage increase of 2% and you expect inflation to be 3%. What nominal wage increase should you seek?

a. 2.0% b. 3.0% c. 1.0% d. 5.0% e. 1.5%