Two athletes of equal ability are competing for aprize of $10,000. Each is deciding whether to takea dangerous performance-enhancing drug. If oneathlete takes the drug and the other does not, the onewho takes the drug wins the prize. If both or neithertake the drug, they tie and split the prize. Taking thedrug imposes health risks that are equivalent to a lossof X dollars.QuickQuiz Answers1. d 2. c 3. a 4. d 5. c 6. b 7. d 8. ba. Draw a 2×2 payoff matrix describing the decisionsthe athletes face.b. For what X is taking the drug the Nashequilibrium?c. Does making the drug safer (that is, lowering X)make the athletes better or worse off? Explain.

Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter22: Frontiers Of Microeconomics
Section: Chapter Questions
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Two athletes of equal ability are competing for a
prize of $10,000. Each is deciding whether to take
a dangerous performance-enhancing drug. If one
athlete takes the drug and the other does not, the one
who takes the drug wins the prize. If both or neither
take the drug, they tie and split the prize. Taking the
drug imposes health risks that are equivalent to a loss
of X dollars.
QuickQuiz Answers
1. d 2. c 3. a 4. d 5. c 6. b 7. d 8. b
a. Draw a 2×2 payoff matrix describing the decisions
the athletes face.
b. For what X is taking the drug the Nash
equilibrium?
c. Does making the drug safer (that is, lowering X)
make the athletes better or worse off? Explain.

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