1. Why don't individuals move in a non-cooperative game from an individual optimum to the social optimum?

While there may be a group incentive to move individuals, there is no unilateral incentive for any one individual to move there.

2. Suppose an instructor in a class grades on a curve (i.e., 10% receive an A, 20% a B, and so on). Can cheating by students on an exam be considered a Nash equilibrium in that situation? Why or why not?

Potentially, depending on the probability of getting caught, etc. The main point is that if one individual cheats, s/he has an advantage over all others. That forces other students to cheat as well. No individual has an incentive to not cheat when all others are cheating.

3. Consider the vaccination example. Is there a way to move individuals to the cooperative outcome, in which a critical mass of people receive vaccinations? How could this occur?

The government could subsidize vaccinations, which reduces the cost of the vaccination, increasing net benefit. Individuals must be given a reason to move away from that non-cooperative outcome.

Multiple Choice/True False Questions