Question 1

The prisoners' dilemma involves:only two players.any number of players.individual persons only.individuals or organizations.

Accepted Answer

A) I and IV 
B) II and III 
C) I and III 
D) II and IV 
A) I and IV 
B) II and III 
C) I and III 
D) II and IV

Question 2

{MISSING IMAGE}According to the figure shown, Apple:

Accepted Answer

A) do not have stable equilibrium outcomes. 
B) may have stable equilibrium outcomes. 
C) always have stable equilibrium outcomes. 
D) don't exist; all games have at least one dominant strategy. 
A) do not have stable equilibrium outcomes. 
B) may have stable equilibrium outcomes. 
C) always have stable equilibrium outcomes. 
D) don't exist; all games have at least one dominant strategy.

Question 3

The study of how people behave strategically under different circumstances is called:

Accepted Answer

A) game theory. 
B) game strategy. 
C) strategy optimization. 
D) strategy theory. 
A) game theory. 
B) game strategy. 
C) strategy optimization. 
D) strategy theory.

Question 4

When competing firms have a commitment strategy, it is called:

Accepted Answer

A) collusion. 
B) competitive cooperation. 
C) predatory pricing. 
D) competition. 
A) collusion. 
B) competitive cooperation. 
C) predatory pricing. 
D) competition.

Question 5

According to the figure shown, both players:

Accepted Answer

A) will cooperate in an attempt to reach a stable equilibrium, but will not achieve it. 
B) will act in self-interest and achieve a stable, but less than optimum, equilibrium. 
C) will act in self-interest and achieve an optimum equilibrium that is stable. 
D) have an incentive to charge a low price and undercut the competition. 
A) will cooperate in an attempt to reach a stable equilibrium, but will not achieve it. 
B) will act in self-interest and achieve a stable, but less than optimum, equilibrium. 
C) will act in self-interest and achieve an optimum equilibrium that is stable. 
D) have an incentive to charge a low price and undercut the competition.

Question 6

The figure shown displays the choices that could be made by two firms in an industry: Tesla and Ford. Both companies are trying to decide whether or not to invest in research and development. Tesla will make a decision first, and then Ford will make a decision after observing Tesla's choice. The payoffs are the profits (in millions)these companies will earn as a result of their choices.What profits can we predict Tesla will earn given the outcome of this game?

Accepted Answer

A) $50 million 
B) $70 million 
C) $10 million 
D) $40 million 
A) $50 million 
B) $70 million 
C) $10 million 
D) $40 million

Question 7

In a prisoner's dilemma:players have no regrets, given what the other players have chosen.there must be a dominant strategy for all players.equilibrium will never be reached.

Accepted Answer

A) I and II only 
B) III only 
C) I, II, and III 
D) None of these are correct. 
A) I and II only 
B) III only 
C) I, II, and III 
D) None of these are correct.

Question 8

Which of the following statements is true regarding collusion?

Accepted Answer

A) It can only occur when no dominant strategy is present. 
B) It is a cooperative outcome between competitors. 
C) Economists cannot theoretically model it. 
D) It is a theoretical concept that is rarely observed. 
A) It can only occur when no dominant strategy is present. 
B) It is a cooperative outcome between competitors. 
C) Economists cannot theoretically model it. 
D) It is a theoretical concept that is rarely observed.

Question 9

What is the Nash Equilibrium of the game in the figure shown?

Accepted Answer

A) Firm 1 and Firm 2 charge a high price. 
B) Firm 1 charges a high price and Firm 2 charges a low price. 
C) Firm 1 charges a low price and Firm 2 charges a high price. 
D) Firm 1 and Firm 2 charge a low price. 
A) Firm 1 and Firm 2 charge a high price. 
B) Firm 1 charges a high price and Firm 2 charges a low price. 
C) Firm 1 charges a low price and Firm 2 charges a high price. 
D) Firm 1 and Firm 2 charge a low price.

Question 10

According to the figure shown, adidas:

Accepted Answer

A) should charge a low price, regardless of what Nike chooses to do. 
B) should charge a high price, regardless of what Nike chooses to do. 
C) does not have a dominant strategy. 
D) should use the first-mover advantage and charge a low price. 
A) should charge a low price, regardless of what Nike chooses to do. 
B) should charge a high price, regardless of what Nike chooses to do. 
C) does not have a dominant strategy. 
D) should use the first-mover advantage and charge a low price.

Question 11

In the prisoner's dilemma:

Accepted Answer

A) a stable outcome is impossible. 
B) strategy does not affect the outcome. 
C) a stable outcome is possible. 
D) a commitment strategy is needed to reach a stable outcome. 
A) a stable outcome is impossible. 
B) strategy does not affect the outcome. 
C) a stable outcome is possible. 
D) a commitment strategy is needed to reach a stable outcome.

Question 12

If the game in the figure shown results in a stable outcome, Nike will earn profits of:

Accepted Answer

A) $2 million. 
B) $4 million. 
C) $10 million. 
D) $15 million. 
A) $2 million. 
B) $4 million. 
C) $10 million. 
D) $15 million.

Question 13

{MISSING IMAGE}According to the figure shown, Apple:

Accepted Answer

A) has a dominant strategy to charge a high price. 
B) does not have a dominant strategy. 
C) will reach an optimum outcome by acting in its own self-interest. 
D) has a dominant strategy to charge a low price. 
A) has a dominant strategy to charge a high price. 
B) does not have a dominant strategy. 
C) will reach an optimum outcome by acting in its own self-interest. 
D) has a dominant strategy to charge a low price.

Question 14

Which of the following statements is true about strategy in economic games?

Accepted Answer

A) There is only one strategy associated with each outcome. 
B) There could be several strategies that can achieve the same goal. 
C) All strategies followed in one particular game should be similar in order to be successful. 
D) If one person's strategy is wildly different from others' strategies, that person will either come in first or last. 
A) There is only one strategy associated with each outcome. 
B) There could be several strategies that can achieve the same goal. 
C) All strategies followed in one particular game should be similar in order to be successful. 
D) If one person's strategy is wildly different from others' strategies, that person will either come in first or last.

Question 15

All games involve which of the following?

Accepted Answer

A) Strategies 
B) Someone to enforce the rules 
C) Cards or dice 
D) Full information 
A) Strategies 
B) Someone to enforce the rules 
C) Cards or dice 
D) Full information

Question 16

Game theory is:

Accepted Answer

A) the study of how people behave strategically under different circumstances. 
B) used by economists to evaluate behavior in a variety of settings. 
C) a useful tool in predicting strategic behavior. 
D) All of these statements are true. 
A) the study of how people behave strategically under different circumstances. 
B) used by economists to evaluate behavior in a variety of settings. 
C) a useful tool in predicting strategic behavior. 
D) All of these statements are true.

Question 17

The players in a prisoner's dilemma:

Accepted Answer

A) would be much better off if they could cooperate. 
B) have an incentive to never cooperate. 
C) have a dominant strategy to never cooperate. 
D) All of these statements are true. 
A) would be much better off if they could cooperate. 
B) have an incentive to never cooperate. 
C) have a dominant strategy to never cooperate. 
D) All of these statements are true.

Question 18

For a commitment strategy to work:

Accepted Answer

A) the punishment must be so bad that it outweighs the incentive to defect. 
B) the punishment must occur immediately after the game is played. 
C) both players must agree to a punishment. 
D) no player may have a dominant strategy. 
A) the punishment must be so bad that it outweighs the incentive to defect. 
B) the punishment must occur immediately after the game is played. 
C) both players must agree to a punishment. 
D) no player may have a dominant strategy.

Question 19

Backward induction involves:

Accepted Answer

A) the process of analyzing a problem in reverse. 
B) thinking forward and working backward. 
C) starting with the last choice and working backward to determine an optimal strategy. 
D) All of these statements are true. 
A) the process of analyzing a problem in reverse. 
B) thinking forward and working backward. 
C) starting with the last choice and working backward to determine an optimal strategy. 
D) All of these statements are true.

Question 20

The figure shown represents the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop. MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices, in the hopes that a new business will not be able to compete at these prices. The Rock Shop is trying to decide whether or not it should enter the market.According to the figure:

Accepted Answer

A) The Rock Shop has a dominant strategy, but MiiTunes does not. 
B) MiiTunes has a dominant strategy, but The Rock Shop does not. 
C) neither store has a dominant strategy. 
D) both stores have a dominant strategy. 
A) The Rock Shop has a dominant strategy, but MiiTunes does not. 
B) MiiTunes has a dominant strategy, but The Rock Shop does not. 
C) neither store has a dominant strategy. 
D) both stores have a dominant strategy.

Exam 9: Game Theory and Strategic Thinking

The prisoners' dilemma involves:only two players.any number of players.individual persons only.individuals or organizations.

{MISSING IMAGE}According to the figure shown, Apple:

The study of how people behave strategically under different circumstances is called:

When competing firms have a commitment strategy, it is called:

According to the figure shown, both players:

In a prisoner's dilemma:players have no regrets, given what the other players have chosen.there must be a dominant strategy for all players.equilibrium will never be reached.

Which of the following statements is true regarding collusion?

What is the Nash Equilibrium of the game in the figure shown?

According to the figure shown, adidas:

In the prisoner's dilemma:

If the game in the figure shown results in a stable outcome, Nike will earn profits of:

{MISSING IMAGE}According to the figure shown, Apple:

Which of the following statements is true about strategy in economic games?

All games involve which of the following?

Game theory is:

The players in a prisoner's dilemma:

For a commitment strategy to work:

Backward induction involves:

Economics and Life

Specialization and Exchange

Markets

Elasticity

Efficiency

Government Intervention

Consumer Behavior

Behavioral Economics: a Closer Look at Decision Making

Information

Time and Uncertainty

The Costs of Production

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

The Facts of Production

International Trade

Externalities

Public Goods and Common Resources

Taxation and the Public Budget

Poverty, Inequality, and Discrimination

Political Choices

Public Policy and Choice Architecture

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