Question 1

Most games in real life:

Accepted Answer

A)  require intuition, common sense, and calculations. 
B)  require a mixed strategy. 
C)  require a rollback strategy. 
D)  have a best solution. 
A)  require intuition, common sense, and calculations. 
B)  require a mixed strategy. 
C)  require a rollback strategy. 
D)  have a best solution.

Question 2

A Nash equilibrium refers to a:

Accepted Answer

A)  cooperative game. 
B)  a sequential game. 
C)  a repeated game. 
D)  a noncooperative game. 
A)  cooperative game. 
B)  a sequential game. 
C)  a repeated game. 
D)  a noncooperative game.

Question 3

A Nash equilibrium:

Accepted Answer

A)  will always be reached. 
B)  is always reached in game playing. 
C)  sometimes may not be reached because people assume others react rationally. 
D)  sometimes may not be reached because people do not assume that others act rationally. 
A)  will always be reached. 
B)  is always reached in game playing. 
C)  sometimes may not be reached because people assume others react rationally. 
D)  sometimes may not be reached because people do not assume that others act rationally.

Question 4

In standard game theory, cheap talk:

Accepted Answer

A)  will fool all the players into cooperating. 
B)  doesn't affect the outcome of the game. 
C)  benefits only trustworthy people. 
D)  changes the payoffs. 
A)  will fool all the players into cooperating. 
B)  doesn't affect the outcome of the game. 
C)  benefits only trustworthy people. 
D)  changes the payoffs.

Question 5

If a player has a dominant strategy, that player will always win the game.

Accepted Answer

A) True 
 B)False

Question 6

Consider the following payoff matrix facing Harry and Sally when each chooses to go to the coffee shop listed. Harry wants to avoid Sally at the coffee shop and is not happy when Sally ends up in the same shop he chooses. Sally would like to see Harry, and so she is not happy when Harry ends up in a different coffee shop.  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Haryy }$
$\begin{array}{|l|l|l|l|}
\hline & & {\text { Starbucks }} & {\text { Dunkin Donuts }} \
\hline \text { Sally } & \text { Starbucks } & \text { H: }-1, \mathrm{~S}: 1 & \text { H: } 1, \mathrm{~S}:-1 \
\hline & \text { Dunkin Donuts } & \text { H: } 1, \mathrm{~S}:-1 & \text { H: }-1, \mathrm{~S}: 1 \
\hline
\end{array}$
 Given this payoff:

Accepted Answer

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

Question 7

Game theory replaces the standard supply and demand model used by economists.

Accepted Answer

A) True 
 B)False

Question 8

The potential for return to cooperation is greatest in:

Accepted Answer

A)  zero sum games. 
B)  repeated games. 
C)  sequential games. 
D)  simultaneous move games. 
A)  zero sum games. 
B)  repeated games. 
C)  sequential games. 
D)  simultaneous move games.

Question 9

The equilibrium solution for the following payoff matrix is: $\begin{array} { | l | l | l | } 
\hline & { \text { A } } & \text { A } \
\hline B & \text { A: } - 1 , B : - 1 & \text { A: } 5 , B : 0 \
\hline B & \text { A: } 2 , B : 2 & \text { A: } 10 , B : 1 \
\hline
\end{array}$

Accepted Answer

A)  ?1, ?1. 
B)  5, 0. 
C)  2, 2. 
D)  10, 1. 
A)  ?1, ?1. 
B)  5, 0. 
C)  2, 2. 
D)  10, 1.

Question 10

In a standard highest sealed-bid auction, a bidder's best strategy:

Accepted Answer

A)  is to bid what he or she would be willing to pay. 
B)  is to bid slightly more than what he or she expects the second highest bidder to bid. 
C)  always ensures that the person who wants it the most will get the bid. 
D)  requires the bidder to understand game theory to bid properly. 
A)  is to bid what he or she would be willing to pay. 
B)  is to bid slightly more than what he or she expects the second highest bidder to bid. 
C)  always ensures that the person who wants it the most will get the bid. 
D)  requires the bidder to understand game theory to bid properly.

Question 11

A set of strategies in which no player can improve his or her payoff by changing his or her own action is called a:

Accepted Answer

A)  Nash equilibrium. 
B)  Vickrey position. 
C)  framing strategy. 
D)  dominant strategy. 
A)  Nash equilibrium. 
B)  Vickrey position. 
C)  framing strategy. 
D)  dominant strategy.

Question 12

Formal economic reasoning applied to situations in which decisions are interdependent is called:

Accepted Answer

A)  economic decision making. 
B)  monopolistic decision making. 
C)  competitive decision making. 
D)  game theory. 
A)  economic decision making. 
B)  monopolistic decision making. 
C)  competitive decision making. 
D)  game theory.

Question 13

The fact that airlines offer off-peak airline discounts rather than peak-time surcharges is an example of:

Accepted Answer

A)  the endowment effect. 
B)  framing effects. 
C)  non-zero sum game. 
D)  irrational behavior. 
A)  the endowment effect. 
B)  framing effects. 
C)  non-zero sum game. 
D)  irrational behavior.

Question 14

If people are given one of two items of the same value and are given the choice to exchange it:

Accepted Answer

A)  about 50 percent will make the change since half prefer the item they have and half prefer the item they do not have. 
B)  everyone will keep the first item since it was free. 
C)  everyone will trade since people like to trade. 
D)  most will keep the original item since people tend to value what they have more than a product that they do not. 
A)  about 50 percent will make the change since half prefer the item they have and half prefer the item they do not have. 
B)  everyone will keep the first item since it was free. 
C)  everyone will trade since people like to trade. 
D)  most will keep the original item since people tend to value what they have more than a product that they do not.

Question 15

"Leaving money on the table" refers to the potential gains to be made when people act irrationally.

Accepted Answer

A) True 
 B)False

Question 16

The best strategy for each player if this game is repeated is: $\begin{array} { | l | l | c | } 
\hline & \text { A: Cheat } & \text { A: Collaborate } \
\hline \text { B: Cheat } & \text { A: } 1 , \text { B: } - 1 & \text { A: } - 1 , \text { B: } 1 \
\hline \text { B: Collaborate } & \text { A: } - 1 , \text { B:1 } & \text { A: } 1 , \text { B: } - 1 \
\hline
\end{array}$

Accepted Answer

A)  his or her dominant strategy. 
B)  a mixed strategy. 
C)  to cheat. 
D)  to collaborate. 
A)  his or her dominant strategy. 
B)  a mixed strategy. 
C)  to cheat. 
D)  to collaborate.

Question 17

A screening question is structured to:

Accepted Answer

A)  screen unqualified applicants for a job. 
B)  extract information from prisoners. 
C)  alter a respondent's behavior. 
D)  reveal strategic information about the person who answers. 
A)  screen unqualified applicants for a job. 
B)  extract information from prisoners. 
C)  alter a respondent's behavior. 
D)  reveal strategic information about the person who answers.

Question 18

In the two-thirds game, in which you choose a number between 1 and 100 that is two-thirds of the average chosen by the group, the rollback strategy is to:

Accepted Answer

A)  choose a number randomly. 
B)  be the last person to choose a number. 
C)  be the first person to choose a number. 
D)  choose zero. 
A)  choose a number randomly. 
B)  be the last person to choose a number. 
C)  be the first person to choose a number. 
D)  choose zero.

Question 19

A sequential game is one where:

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.

Question 20

A mixed strategy is most useful:

Accepted Answer

A)  in sequential games. 
B)  in simultaneous games. 
C)  in both sequential and simultaneous games. 
D)  only when the outcome is random. 
A)  in sequential games. 
B)  in simultaneous games. 
C)  in both sequential and simultaneous games. 
D)  only when the outcome is random.

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

Most games in real life:

A Nash equilibrium refers to a:

A Nash equilibrium:

In standard game theory, cheap talk:

If a player has a dominant strategy, that player will always win the game.

Game theory replaces the standard supply and demand model used by economists.

The potential for return to cooperation is greatest in:

The equilibrium solution for the following payoff matrix is: A A B A: -1,B:-1 A: 5,B:0 B A: 2,B:2 A: 10,B:1

In a standard highest sealed-bid auction, a bidder's best strategy:

A set of strategies in which no player can improve his or her payoff by changing his or her own action is called a:

Formal economic reasoning applied to situations in which decisions are interdependent is called:

The fact that airlines offer off-peak airline discounts rather than peak-time surcharges is an example of:

If people are given one of two items of the same value and are given the choice to exchange it:

"Leaving money on the table" refers to the potential gains to be made when people act irrationally.

The best strategy for each player if this game is repeated is: A: Cheat A: Collaborate B: Cheat A: 1, B: -1 A: -1, B: 1 B: Collaborate A: -1, B:1 A: 1, B: -1

A screening question is structured to:

In the two-thirds game, in which you choose a number between 1 and 100 that is two-thirds of the average chosen by the group, the rollback strategy is to:

A sequential game is one where:

A mixed strategy is most useful:

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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