1. Your opponent has hidden a prize in one of the boxes below. He wants you not to find it. Your goal is to find it. You can only open one box. Which box will you open? Box 1Box 2Box 3 Box 4 1.Box 1 2.Box 2 3.Box 3 4.Box 4

2. You must hide a prize in one of the boxes below. Your opponent will try to find it by opening just one box. Your goal is for him not to find it. In which box will you hide it? Box 1Box 2Box 3 Box 4 1.Box 1 2.Box 2 3.Box 3 4.Box 4

3. Your opponent has hidden a prize in one of the boxes below. He wants you not to find it. Your goal is to find it. You can only open one box. Which box will you open? Box 1Box 2Box 3 Box 4 1.Box 1 2.Box 2 3.Box 3 4.Box 4

4. You must hide a prize in one of the boxes below. Your opponent will try to find it by opening just one box. Your goal is for him not to find it. In which box will you hide it? Box 1Box 2Box 3 Box 4 1.Box 1 2.Box 2 3.Box 3 4.Box 4

5. There are two ways to travel from A to B and 2000 commuters make this trip every day. One route always takes 40 minutes. The other route takes 20+(N/40) minutes where N is the number of travelers using this route. Travellers want to minimize travel time. They are indifferent between the two routes when 1.N=1600 2.N=1200 3.N=1000 4.N=800 5.N=600

6. Travel time on a commuter route is 15+N/10 minutes where N is the number of users. To each user, the cost of an extra minute of travel time is 30 cents. 150 commuters use this route. The total cost of the externality caused by one more driver is about: 1.$4.50 2.$15.00 3.$0.30 4. $30 5.$2.0

7. Why is that? Travel time for each traveler goes up by 1/10 of a minute when another user takes route. 1/10 of a minute for each of 50 minutes totals 150/10=15 minutes. At 30 cents per minute, the cost is.30x15=$4.50.

8. Which is an example of a positive externality. 1.Alice outbids Bob for a good. 2.Bob chatters to his seatmate throughout a symphony concert. 3.Alice maintains a garden which her neighbors enjoy. 4.Bob buys a steak and consumes it at home.

9. And on to our lecture…