Professor Parallax chooses two students in his economics class, ...

[littleanan]

Professor Parallax chooses two students in his economics class, Jasmine and Cassandra, to participate in the ultimatum game. He chooses Jasmine to be the allocator and Cassandra to be the recipient.
 
  He gives Jasmine 50 and as the allocator, she gets to decide how to split the money with Cassandra. If Cassandra decides to accept the amount allocated to her by Jasmine, both students get to keep the money. If Cassandra decides to reject her allocation, neither student gets to keep the money. How much will each student end up with if each student acts as if fairness is important? How much will each student end up with if only Cassandra acts as if fairness is important? How much will each student end up with if neither student cares about fairness?

Question 2

An increase in the wage rate causes
 
  A) a rightward shift of the firm's labor demand curve.
  B) a decrease in the quantity of labor demanded.
  C) an increase in labor's marginal productivity.
  D) a leftward shift of the firm's labor demand curve.

[Dominic]

Answer to Question 1

If both students care about fairness, each will end up with 25. If only Cassandra, the recipient, cares about fairness, each student will end up with nothing since she would reject any split of the money other than 25 and 25. If neither student cares about fairness, Jasmine will give up as little as possible without leaving Cassandra with nothing. The split in this case will be 49.99 to Jasmine and 0.01 to Cassandra.

Answer to Question 2

B