Your product fails about 2% of the time, on average. some customers purchase the extended warranty you offer in which you will replace the product if it fails. suppose that you have currently set the price of the extended warranty at 2% of the product price. an analyst at your company argues that after purchasing the extended warranty, customers are less likely to exercise caution when using the product because they will know that they can get their product replaced. the analyst is claiming that will cause the claim rate to be than 2%. true or false: you should set the price of the extended warranty at less than 2% of the product price.

Suppose that hubert, an economist from an am talk radio program, and kate, an economist from a nonprofit organization on the west coast, are arguing over government bailouts. the following dialogue shows an excerpt from their debate: kate: to recent financial crises, the concept of bailouts is a hot topic for debate among everyone these days. hubert: indeed, it’s gotten crazy! a government bailout of severely distressed financial firms is unnecessary because free markets will properly price assets. kate: i don’t know about that. without a bailout of severely distressed financial firms, the economy will experience a deep recession. the disagreement between these economists is most likely due todifferences in scientific judgments . despite their differences, with which proposition are two economists chosen at random most likely to agree? business managers can raise profit more easily by reducing costs than by raising revenue. central banks should focus more on maintaining low unemployment than on maintaining low inflation. employers should not be restricted from outsourcing work to foreign nations

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Evaluate a real situation between two economic actors; it could be any scenario: two competing businesses, two countries in negotiations, two kids trading baseball cards, you and another person involved in an exchange or anything else. use game theory to analyze the situation and the outcome (or potential outcome). be sure to explain the incentives, benefits and risks each face.