Question 1

The prisoner's dilemma is a theoretical tool with little in the way of practical applications.

Accepted Answer

A) True 
 B)False  False

Question 2

In a sealed-bid Vickrey auction, the person who bids the:

Accepted Answer

A)  highest gets the object of the bid at the price he or she bid. 
B)  second highest bidder gets the good and pays that price. 
C)  second highest bidder has the option to receive the good if he or she pays the price of the highest bidder. 
D)  highest bidder gets the object but pays the price bid by the second highest bidder. 
A)  highest gets the object of the bid at the price he or she bid. 
B)  second highest bidder gets the good and pays that price. 
C)  second highest bidder has the option to receive the good if he or she pays the price of the highest bidder. 
D)  highest bidder gets the object but pays the price bid by the second highest bidder. D

Question 3

When some people do not act rationally, others can profit from that irrationality.

Accepted Answer

A) True 
 B)False  True

Question 4

Assuming the standard assumptions, in a repeated-play ultimatum game, the first player's best strategy in the last round is to:

Accepted Answer

A)  split the money evenly with a bit more going to him or herself. 
B)  give the most money to the opponent. 
C)  give the most money to oneself. 
D)  take all the money for oneself. 
A)  split the money evenly with a bit more going to him or herself. 
B)  give the most money to the opponent. 
C)  give the most money to oneself. 
D)  take all the money for oneself.

Question 5

Every value in a payoff matrix represents the:

Accepted Answer

A)  gains and losses of decisions for each player regardless of the decisions of other players. 
B)  best possible outcomes of various players in a game. 
C)  gain or loss of a decision for each player given the decisions of other players. 
D)  worst possible outcomes of various players in a game. 
A)  gains and losses of decisions for each player regardless of the decisions of other players. 
B)  best possible outcomes of various players in a game. 
C)  gain or loss of a decision for each player given the decisions of other players. 
D)  worst possible outcomes of various players in a game.

Question 6

In a mixed strategy:

Accepted Answer

A)  the payoffs are mixed during each round. 
B)  the order of who chooses first is mixed. 
C)  moves can be predicted. 
D)  players try to avoid demonstrating a pattern. 
A)  the payoffs are mixed during each round. 
B)  the order of who chooses first is mixed. 
C)  moves can be predicted. 
D)  players try to avoid demonstrating a pattern.

Question 7

In experiments testing game theory, cheap talk does not affect the outcome of a game.

Accepted Answer

A) True 
 B)False

Question 8

Game theory is designed to study situations in which each agent's decisions are:

Accepted Answer

A)  interdependent. 
B)  independent. 
C)  constrained. 
D)  uninformed. 
A)  interdependent. 
B)  independent. 
C)  constrained. 
D)  uninformed.

Question 9

Strategic reasoning applies to situations in which decisions are interdependent.

Accepted Answer

A) True 
 B)False

Question 10

A mixed strategy means a player:

Accepted Answer

A)  makes random moves in a sequential game. 
B)  makes random moves in a simultaneous game. 
C)  mixes random moves with nonrandom moves. 
D)  mixes optimal and suboptimal moves to confuse her opponent. 
A)  makes random moves in a sequential game. 
B)  makes random moves in a simultaneous game. 
C)  mixes random moves with nonrandom moves. 
D)  mixes optimal and suboptimal moves to confuse her opponent.

Question 11

"Framing effects" suggest that the wording of questions affects people's survey responses.

Accepted Answer

A) True 
 B)False

Question 12

Game theory suggests that acting in our own immediate best interest leads to the best possible outcome.

Accepted Answer

A) True 
 B)False

Question 13

If two choices are the same but one is presented in a positive manner and one in a negative context, people:

Accepted Answer

A)  are rational and respond the same. 
B)  respond the same because of the endowment effect 
C)  respond differently because of the endowment effect. 
D)  respond differently because of the framing effect. 
A)  are rational and respond the same. 
B)  respond the same because of the endowment effect 
C)  respond differently because of the endowment effect. 
D)  respond differently because of the framing effect.

Question 14

Consider the following payoff matrix facing two criminals. $\begin{array} { | l | l | l | } 
\hline &  { \text { A: Confess } } & \text { A: Not Confess } \
\hline \text { B: Confess } & \text { A: 20yrs, B: 20yrs } & \text { A: 50yrs, B: 2yrs } \
\hline \text { B: Not Confess } & \text { A: 2yrs, B: 50yrs } & \text { A: 10yrs, B: 10yrs } \
\hline
\end{array}$ Their options are to confess or not to confess. Given this information:

Accepted Answer

A)  A has a dominant strategy but B does not. 
B)  B has a dominant strategy but A does not. 
C)  both A and B have dominant strategies. 
D)  neither A nor B has a dominant strategy. 
A)  A has a dominant strategy but B does not. 
B)  B has a dominant strategy but A does not. 
C)  both A and B have dominant strategies. 
D)  neither A nor B has a dominant strategy.

Question 15

Backward induction means a player:

Accepted Answer

A)  studies his opponent's moves to figure out what she did wrong. 
B)  studies what other players have done in similar situations. 
C)  studies the rules of the game to determine how to make his next move. 
D)  works from the desired outcome to determine the decisions that lead to that outcome. 
A)  studies his opponent's moves to figure out what she did wrong. 
B)  studies what other players have done in similar situations. 
C)  studies the rules of the game to determine how to make his next move. 
D)  works from the desired outcome to determine the decisions that lead to that outcome.

Question 16

A Nash equilibrium assumes that a player follows his or her best strategy:

Accepted Answer

A)  given that the other players follow a random strategy. 
B)  given that the other players follow their worst strategy. 
C)  given that the other players follow their best strategy. 
D)  regardless of what other players do. 
A)  given that the other players follow a random strategy. 
B)  given that the other players follow their worst strategy. 
C)  given that the other players follow their best strategy. 
D)  regardless of what other players do.

Question 17

In a standard sealed-bid auction, the person who bids the:

Accepted Answer

A)  highest gets the object of the bid. 
B)  second highest gets the good and pays that price. 
C)  second highest has the option to receive the good if she pays the price of the highest bidder. 
D)  highest gets the object but pays the price bid by the second highest bidder. 
A)  highest gets the object of the bid. 
B)  second highest gets the good and pays that price. 
C)  second highest has the option to receive the good if she pays the price of the highest bidder. 
D)  highest gets the object but pays the price bid by the second highest bidder.

Question 18

Game theory:

Accepted Answer

A)  is more restrictive than the standard supply/demand model. 
B)  is more flexible than the standard supply/demand model. 
C)  replaces the standard supply/demand model. 
D)  replaces the monopoly model. 
A)  is more restrictive than the standard supply/demand model. 
B)  is more flexible than the standard supply/demand model. 
C)  replaces the standard supply/demand model. 
D)  replaces the monopoly model.

Question 19

Consider the following payoff matrix facing Harry and Sally when each chooses to go to the coffee shop listed. Both Harry and Sally would like to meet each other but are shy about asking the other out on a date.  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Haryy }$
$\begin{array}{|l|l|l|l|}
\hline & & {\text { Starbucks }} & \text { Dunkin Donuts } \
\hline \text { Sally } & \text { Starbucks } & \text { H: } 1, \mathrm{~S}: 1 & \text { H: } 0, \mathrm{~S}: 0 \
\hline & \text { Dunkin Donuts } & \text { H: } 0, \mathrm{~S}: 0 & \text { H: } 1, \mathrm{~S}: 1 \
\hline
\end{array}$  What is Harry's best strategy?

Accepted Answer

A)  Harry has no best strategy. 
B)  Go to Dunkin' Donuts. 
C)  Go to Starbucks. 
D)  Stay at home. 
A)  Harry has no best strategy. 
B)  Go to Dunkin' Donuts. 
C)  Go to Starbucks. 
D)  Stay at home.

Question 20

A simultaneous game is one in which:

Accepted Answer

A)  players act together to achieve a common goal. 
B)  players take turns making moves and/or decisions. 
C)  players make their moves and/or decisions at the same time. 
D)  there is never a winner if players act rationally. 
A)  players act together to achieve a common goal. 
B)  players take turns making moves and/or decisions. 
C)  players make their moves and/or decisions at the same time. 
D)  there is never a winner if players act rationally.

Exam 20: Game Theory, Strategic Decision Making, and Behavioral Economics

The prisoner's dilemma is a theoretical tool with little in the way of practical applications.

In a sealed-bid Vickrey auction, the person who bids the:

When some people do not act rationally, others can profit from that irrationality.

Assuming the standard assumptions, in a repeated-play ultimatum game, the first player's best strategy in the last round is to:

Every value in a payoff matrix represents the:

In a mixed strategy:

In experiments testing game theory, cheap talk does not affect the outcome of a game.

Game theory is designed to study situations in which each agent's decisions are:

Strategic reasoning applies to situations in which decisions are interdependent.

A mixed strategy means a player:

"Framing effects" suggest that the wording of questions affects people's survey responses.

Game theory suggests that acting in our own immediate best interest leads to the best possible outcome.

If two choices are the same but one is presented in a positive manner and one in a negative context, people:

Consider the following payoff matrix facing two criminals. A: Confess A: Not Confess B: Confess A: 20yrs, B: 20yrs A: 50yrs, B: 2yrs B: Not Confess A: 2yrs, B: 50yrs A: 10yrs, B: 10yrs Their options are to confess or not to confess. Given this information:

Backward induction means a player:

A Nash equilibrium assumes that a player follows his or her best strategy:

In a standard sealed-bid auction, the person who bids the:

Game theory:

A simultaneous game is one in which:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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