Question 1

In the mini-case on pay-for-delay,

Accepted Answer

A) incumbents are attempting to delay entry of generic drugs. 
B) the deals incumbents made with potential entrants may be illegal. 
C) the deals are only profitable for approximately six months. 
D) All of the above. 
A) incumbents are attempting to delay entry of generic drugs. 
B) the deals incumbents made with potential entrants may be illegal. 
C) the deals are only profitable for approximately six months. 
D) All of the above. D

Question 2

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $60 fee is required to enter the market. If firm A chooses its strategy first, then

Accepted Answer

A) firm A will not enter. 
B) neither firm will enter. 
C) both firms will enter. 
D) firm A will enter and firm B will not. 
A) firm A will not enter. 
B) neither firm will enter. 
C) both firms will enter. 
D) firm A will enter and firm B will not. D

Question 3

In an ultimatum game where the payoff totals $100 and is split in $1 increments, the rational amount for the proposer to offer and the responder to take is

Accepted Answer

A) $0. 
B) $1. 
C) $50. 
D) $100. 
A) $0. 
B) $1. 
C) $50. 
D) $100. B

Question 4

Repeated games are conducive to

Accepted Answer

A) explicit cooperation. 
B) tacit cooperation. 
C) corruption. 
D) failing to have a Nash equilibrium. 
A) explicit cooperation. 
B) tacit cooperation. 
C) corruption. 
D) failing to have a Nash equilibrium.

Question 5

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the incumbent will deter entry because

Accepted Answer

A) it is more profitable than accommodating entry. 
B) it increases consumer surplus. 
C) the potential entrant winds up with zero profit. 
D) the incumbent would earn zero profit if it accommodated entry. 
A) it is more profitable than accommodating entry. 
B) it increases consumer surplus. 
C) the potential entrant winds up with zero profit. 
D) the incumbent would earn zero profit if it accommodated entry.

Question 6

An incumbent's threat to retaliate after a potential competitor enters the market will be taken seriously by potential competitors if

Accepted Answer

A) the incumbent can still earn a profit after carrying out the threat. 
B) the incumbent earns greater profit carrying out the threat than by accommodating entry. 
C) the potential entrant cannot earn a profit if the threat is carried out. 
D) the potential entrant's profit exceeds the incumbent's if the threat is carried out. 
A) the incumbent can still earn a profit after carrying out the threat. 
B) the incumbent earns greater profit carrying out the threat than by accommodating entry. 
C) the potential entrant cannot earn a profit if the threat is carried out. 
D) the potential entrant's profit exceeds the incumbent's if the threat is carried out.

Question 7

With regard to preventing entry, if identical firms act simultaneously,

Accepted Answer

A) they cannot credibly threaten each other. 
B) they will all incur losses. 
C) only one firm will enter the market. 
D) none of them will enter the market. 
A) they cannot credibly threaten each other. 
B) they will all incur losses. 
C) only one firm will enter the market. 
D) none of them will enter the market.

Question 8

If a monopolist faces entry by a potential rival, investing to lower its marginal cost

Accepted Answer

A) is a credible way to deter entry. 
B) is not a credible threat. 
C) is credible but will not deter entry. 
D) will not occur, even when there are no barriers to entry. 
A) is a credible way to deter entry. 
B) is not a credible threat. 
C) is credible but will not deter entry. 
D) will not occur, even when there are no barriers to entry.

Question 9

In a finitely repeated prisoners' dilemma game,

Accepted Answer

A) firms will only cooperate if they each adopt a tit-for-tat strategy. 
B) firms cooperate and achieve the collusive Nash equilibrium for all rounds. 
C) firms cooperate for most of the rounds, but switch to the non-cooperative outcome in the final couple of rounds. 
D) firms do not cooperate and the static game Nash equilibrium is the outcome for each round. 
A) firms will only cooperate if they each adopt a tit-for-tat strategy. 
B) firms cooperate and achieve the collusive Nash equilibrium for all rounds. 
C) firms cooperate for most of the rounds, but switch to the non-cooperative outcome in the final couple of rounds. 
D) firms do not cooperate and the static game Nash equilibrium is the outcome for each round.

Question 10

Regarding fixed costs of entry

Accepted Answer

A) both incumbents and potential entrants are affected by them. 
B) potential entrants are affected by them while incumbents are not. 
C) neither incumbents nor potential entrants consider them. 
D) incumbent's decisions are affected by them, while the potential entrant ignores them. 
A) both incumbents and potential entrants are affected by them. 
B) potential entrants are affected by them while incumbents are not. 
C) neither incumbents nor potential entrants consider them. 
D) incumbent's decisions are affected by them, while the potential entrant ignores them.

Question 11

One way to avoid holdups is to

Accepted Answer

A) use contracts. 
B) vertically integrate. 
C) use multiple sources. 
D) All of the above. 
A) use contracts. 
B) vertically integrate. 
C) use multiple sources. 
D) All of the above.

Question 12

An incumbent announces it will significantly increase output in the next period, but only has contracts for the amount produced this period. The announcement is a

Accepted Answer

A) credible threat. 
B) non-credible threat. 
C) commitment. 
D) mixed strategy. 
A) credible threat. 
B) non-credible threat. 
C) commitment. 
D) mixed strategy.

Question 13

A disadvantage of moving too quickly is that

Accepted Answer

A) costs of entry are higher. 
B) the likelihood of misunderstanding the demand is greater. 
C) followers gain an advantage by learning from the first-mover. 
D) All of the above. 
A) costs of entry are higher. 
B) the likelihood of misunderstanding the demand is greater. 
C) followers gain an advantage by learning from the first-mover. 
D) All of the above.

Question 14

If a Cournot duopolist announced that it will double its output,

Accepted Answer

A) it becomes the leader. 
B) the other firm does not view the announcement as credible. 
C) the other firm will shut down. 
D) the other firm will double output also. 
A) it becomes the leader. 
B) the other firm does not view the announcement as credible. 
C) the other firm will shut down. 
D) the other firm will double output also.

Question 15

Assume a firm is a monopoly and enjoys $10 million in profits per year. The firm lobbies to have a moratorium passed by Congress on new firms in its market for the next 25 years. If there is no discount rate, how much would the firm be willing to pay to deter entry?

Accepted Answer

A) $250 million 
B) $25 million 
C) $100 million 
D) $250 billion 
A) $250 million 
B) $25 million 
C) $100 million 
D) $250 billion

Question 16

In the Stackelberg model, the leader has a first-mover advantage because it

Accepted Answer

A) has lower costs than the follower. 
B) chooses its output to manipulate the follower to produce the output that most benefits the leader. 
C) reacts to the follower's decision. 
D) differentiates its output. 
A) has lower costs than the follower. 
B) chooses its output to manipulate the follower to produce the output that most benefits the leader. 
C) reacts to the follower's decision. 
D) differentiates its output.

Question 17

By vertically integrating, two firms can

Accepted Answer

A) increase market share. 
B) avoid holdup problems. 
C) limit the problems inherent in moving too quickly. 
D) avoid antitrust issues. 
A) increase market share. 
B) avoid holdup problems. 
C) limit the problems inherent in moving too quickly. 
D) avoid antitrust issues.

Question 18

In an ultimatum game

Accepted Answer

A) non-profit-maximizing behavior often occurs. 
B) players move simultaneously. 
C) players act in an economically rational way. 
D) one player receives nothing. 
A) non-profit-maximizing behavior often occurs. 
B) players move simultaneously. 
C) players act in an economically rational way. 
D) one player receives nothing.

Question 19

If firms adopt a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

Accepted Answer

A) undefined. 
B) the noncooperative Nash equilibrium. 
C) the collusive Nash equilibrium. 
D) economically inefficient. 
A) undefined. 
B) the noncooperative Nash equilibrium. 
C) the collusive Nash equilibrium. 
D) economically inefficient.

Question 20

In the ultimatum game, one reason players don't choose the rational offer is

Accepted Answer

A) that there are too many possible outcomes to reasonably consider. 
B) they are worse off by taking the offer. 
C) they prefer to sacrifice to punish "unfair" behavior. 
D) that it is not a Nash equilibrium. 
A) that there are too many possible outcomes to reasonably consider. 
B) they are worse off by taking the offer. 
C) they prefer to sacrifice to punish "unfair" behavior. 
D) that it is not a Nash equilibrium.

In the mini-case on pay-for-delay,

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $60 fee is required to enter the market. If firm A chooses its strategy first, then

In an ultimatum game where the payoff totals $100 and is split in $1 increments, the rational amount for the proposer to offer and the responder to take is

Repeated games are conducive to

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the incumbent will deter entry because

An incumbent's threat to retaliate after a potential competitor enters the market will be taken seriously by potential competitors if

With regard to preventing entry, if identical firms act simultaneously,

If a monopolist faces entry by a potential rival, investing to lower its marginal cost

In a finitely repeated prisoners' dilemma game,

Regarding fixed costs of entry

One way to avoid holdups is to

An incumbent announces it will significantly increase output in the next period, but only has contracts for the amount produced this period. The announcement is a

A disadvantage of moving too quickly is that

If a Cournot duopolist announced that it will double its output,

Assume a firm is a monopoly and enjoys $10 million in profits per year. The firm lobbies to have a moratorium passed by Congress on new firms in its market for the next 25 years. If there is no discount rate, how much would the firm be willing to pay to deter entry?

In the Stackelberg model, the leader has a first-mover advantage because it

By vertically integrating, two firms can

In an ultimatum game

If firms adopt a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

In the ultimatum game, one reason players don't choose the rational offer is

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 13: Strategies Over Time

In the mini-case on pay-for-delay,

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $60 fee is required to enter the market. If firm A chooses its strategy first, then

In an ultimatum game where the payoff totals $100 and is split in $1 increments, the rational amount for the proposer to offer and the responder to take is

Repeated games are conducive to

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the incumbent will deter entry because

An incumbent's threat to retaliate after a potential competitor enters the market will be taken seriously by potential competitors if

With regard to preventing entry, if identical firms act simultaneously,

If a monopolist faces entry by a potential rival, investing to lower its marginal cost

In a finitely repeated prisoners' dilemma game,

Regarding fixed costs of entry

One way to avoid holdups is to

An incumbent announces it will significantly increase output in the next period, but only has contracts for the amount produced this period. The announcement is a

A disadvantage of moving too quickly is that

If a Cournot duopolist announced that it will double its output,

Assume a firm is a monopoly and enjoys $10 million in profits per year. The firm lobbies to have a moratorium passed by Congress on new firms in its market for the next 25 years. If there is no discount rate, how much would the firm be willing to pay to deter entry?

In the Stackelberg model, the leader has a first-mover advantage because it

By vertically integrating, two firms can

In an ultimatum game

If firms adopt a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

In the ultimatum game, one reason players don't choose the rational offer is

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters