For each question state whether the statement in italics is true, false or uncertain. Give a
precise and concise justification for your answer. Your justification may include equations
or graphs if necessary. Answers without a justification will get no credit.
(a) (4) In the classic 1960s macabre comedy Dr. Strangelove, the USSR constructed a
Doomsday Machine which would end all life on earth (including in USSR!) if it were
ever attacked by the West. In the movie, the existence of the Doomsday Machine was
kept secret. Keeping the existence of the Doomsday Machine secret would benefit the
USSR more than revealing it to the West.
(b) (4) Suppose North Korea, inspired by Dr. Strangelove, builds a secret "Doomsday
Machine" which would end all life on earth if it were ever attacked by NATO. The
existence of such a machine would be of great benefit to North Korea.
(c) (4) In sequential games, the player who moves later can always secure a higher payoff
by observing the earlier player's action.
(d) (4) It is possible for high barriers to entry to not confer any market power to the small
number of incumbent suppliers.
(e) (4) Consider a labor market with high-productivity and low-productivity workers.
Workers know their own productivity. Employers know distribution of the workers'
productivity but cannot identify the productivity of any individual worker. Suppose it
is possible for workers to send signals to the employers. It is possible for the signal to
credibly reveal the type of both the sender and non-sender if it is cost-less for the
high-productivity worker to send.
