Question 1

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. B

Question 2

In a repeated game, cooperation can be enforced by the use of a trigger strategy that

Accepted Answer

A) leads to a higher payoff of the cheated upon player. 
B) reduces the payoff of the player that reneged the agreement. 
C) rewards the player that reneged the agreement. 
D) is a dominant strategy. 
A) leads to a higher payoff of the cheated upon player. 
B) reduces the payoff of the player that reneged the agreement. 
C) rewards the player that reneged the agreement. 
D) is a dominant strategy. B

Question 3

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

Accepted Answer

A) deters entry. 
B) chooses the Stackelberg leader level of output but the potential entrant does not enter anyway. 
C) chooses the Stackelberg leader level of output and the potential entrant enters. 
D) deters entry and earns zero profit. 
A) deters entry. 
B) chooses the Stackelberg leader level of output but the potential entrant does not enter anyway. 
C) chooses the Stackelberg leader level of output and the potential entrant enters. 
D) deters entry and earns zero profit. A

Question 4

Which of the following factors affecting decision-making is studied by Behavioral Game Theory?

Accepted Answer

A) psychological biases 
B) limited power of calculation 
C) weather forecast 
D) A and B are correct 
A) psychological biases 
B) limited power of calculation 
C) weather forecast 
D) A and B are correct

Question 5

One firm previously operated as a monopoly. Now, one potential entrant exists. Consumers would prefer

Accepted Answer

A) entry, and the firms to split the output equally. 
B) no entry, and for the incumbent to produce the Stackelberg leader level of output. 
C) entry, and for the incumbent to produce the Stackelberg leader level of output. 
D) no entry, and the monopoly to continue. 
A) entry, and the firms to split the output equally. 
B) no entry, and for the incumbent to produce the Stackelberg leader level of output. 
C) entry, and for the incumbent to produce the Stackelberg leader level of output. 
D) no entry, and the monopoly to continue.

Question 6

Suppose two firms, A and B, are simultaneously considering entry into a new market. If neither enters, both earn zero. If both enter, they both lose 100. If one firm enters, it gains 50 while the other earns zero. Set up the payoff matrix for this game and determine if any Nash equilibria exist. Can you predict the outcome? What if firm A gets to decide first?

Accepted Answer

@#IMG-DLM& See the above figure. There are two Nas

Question 7

A subgame perfect Nash equilibrium

Accepted Answer

A) can be solved by backward induction. 
B) is a set of strategies that are a Nash equilibrium in every subgame. 
C) is a stronger form of Nash equilibrium. 
D) All of the above are correct. 
A) can be solved by backward induction. 
B) is a set of strategies that are a Nash equilibrium in every subgame. 
C) is a stronger form of Nash equilibrium. 
D) All of the above are correct.

Question 8

A game in economics is defined as

Accepted Answer

A) something that is shown on ESPN. 
B) competition in which strategic decision making is integral. 
C) competition in general. 
D) an actual strategy chosen by one or more economic agents. 
A) something that is shown on ESPN. 
B) competition in which strategic decision making is integral. 
C) competition in general. 
D) an actual strategy chosen by one or more economic agents.

Question 9

Incumbents are unaffected by fixed costs of entry while potential entrants are affected by them because

Accepted Answer

A) for potential entrants the cost is avoidable, while for the incumbent, it is not. 
B) fixed costs will be greater for the potential entrant than for the incumbent. 
C) fixed costs are zero for the incumbent. 
D) incumbents will act to prevent entry at all costs. 
A) for potential entrants the cost is avoidable, while for the incumbent, it is not. 
B) fixed costs will be greater for the potential entrant than for the incumbent. 
C) fixed costs are zero for the incumbent. 
D) incumbents will act to prevent entry at all costs.

Question 10

If a Cournot duopolist announced that it will double its output, the other firm does not view the announcement as credible because

Accepted Answer

A) the announcing firm's profits will fall if it carries out the threat. 
B) the other firm's profits will fall if the announcing firm carries out the threat. 
C) the other firm's profits will rise if the announcing firm carries out the threat. 
D) the other firm will double output also. 
A) the announcing firm's profits will fall if it carries out the threat. 
B) the other firm's profits will fall if the announcing firm carries out the threat. 
C) the other firm's profits will rise if the announcing firm carries out the threat. 
D) the other firm will double output also.

Question 11

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 12

A single-period duopoly firm can choose output level A or B. The firm decides it will produce level A regardless of what the other firm produces. This decision may occur because

Accepted Answer

A) producing the output level A is a dominant strategy. 
B) this firm has simply decided to always produce at level A. 
C) Both A and B are possible. 
D) None of the above. 
A) producing the output level A is a dominant strategy. 
B) this firm has simply decided to always produce at level A. 
C) Both A and B are possible. 
D) None of the above.

Question 13

-The above figure shows the payoff to two airlines, A and B, of serving a particular route. If the two airlines must decide simultaneously, which one of the following statements is TRUE?

Accepted Answer

A) Only firm A will enter the market. 
B) Only firm B will enter the market. 
C) Neither firm entering is a Nash equilibrium. 
D) The outcome of the game is unpredictable. 
A) Only firm A will enter the market. 
B) Only firm B will enter the market. 
C) Neither firm entering is a Nash equilibrium. 
D) The outcome of the game is unpredictable.

Question 14

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $30 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.

Question 15

-The above figure shows the payoff for two firms, A and B, that must each choose to sell either at a high or low price. Determine the dominant strategies for each firm (if any)and the Nash equilibria (if any).

Accepted Answer

For both firms the dominant strategy is

Question 16

Which auctioned good is more likely to have a common value across potential bidders?

Accepted Answer

A) a truckload of baseball memorabilia 
B) a Monet painting 
C) a customized car 
D) timber 
A) a truckload of baseball memorabilia 
B) a Monet painting 
C) a customized car 
D) timber

Question 17

-The above figure shows a payoff matrix for two firms, A and B, that must choose between selling basic computers or advanced computers. Firm B's dominant strategy

Accepted Answer

A) is to make basic computers. 
B) is to make advanced computers. 
C) is to adopt firm A's strategy. 
D) does not exist in this game. 
A) is to make basic computers. 
B) is to make advanced computers. 
C) is to adopt firm A's strategy. 
D) does not exist in this game.

Question 18

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. If firm A chooses its strategy first, then

Accepted Answer

A) firm A will not enter. 
B) firm B's entry is blockaded. 
C) both firms will enter. 
D) firm A will enter and firm B will not. 
A) firm A will not enter. 
B) firm B's entry is blockaded. 
C) both firms will enter. 
D) firm A will enter and firm B will not.

Question 19

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

Accepted Answer

A) has lower costs than the follower. 
B) commits to producing a larger quantity. 
C) reacts to the follower's decision. 
D) differentiates its output. 
A) has lower costs than the follower. 
B) commits to producing a larger quantity. 
C) reacts to the follower's decision. 
D) differentiates its output.

Question 20

A private auction is an auction in which

Accepted Answer

A) individuals know their own value of the good and everyone else's valuation, too. 
B) individuals have their own valuation of the good but don't know everyone else's. 
C) many auctions are auctioned off at the same time. 
D) only one good is auctioned off. 
A) individuals know their own value of the good and everyone else's valuation, too. 
B) individuals have their own valuation of the good but don't know everyone else's. 
C) many auctions are auctioned off at the same time. 
D) only one good is auctioned off.

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

In a repeated game, cooperation can be enforced by the use of a trigger strategy that

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

Which of the following factors affecting decision-making is studied by Behavioral Game Theory?

One firm previously operated as a monopoly. Now, one potential entrant exists. Consumers would prefer

A subgame perfect Nash equilibrium

A game in economics is defined as

Incumbents are unaffected by fixed costs of entry while potential entrants are affected by them because

If a Cournot duopolist announced that it will double its output, the other firm does not view the announcement as credible because

Repeated games are conducive to

A single-period duopoly firm can choose output level A or B. The firm decides it will produce level A regardless of what the other firm produces. This decision may occur because

-The above figure shows the payoff to two airlines, A and B, of serving a particular route. If the two airlines must decide simultaneously, which one of the following statements is TRUE?

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $30 fee is required to enter the market. If firm A chooses its strategy first, then

-The above figure shows the payoff for two firms, A and B, that must each choose to sell either at a high or low price. Determine the dominant strategies for each firm (if any)and the Nash equilibria (if any).

Which auctioned good is more likely to have a common value across potential bidders?

-The above figure shows a payoff matrix for two firms, A and B, that must choose between selling basic computers or advanced computers. Firm B's dominant strategy

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. If firm A chooses its strategy first, then

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

A private auction is an auction in which

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 14: Game Theory

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

In a repeated game, cooperation can be enforced by the use of a trigger strategy that

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

Which of the following factors affecting decision-making is studied by Behavioral Game Theory?

One firm previously operated as a monopoly. Now, one potential entrant exists. Consumers would prefer

A subgame perfect Nash equilibrium

A game in economics is defined as

Incumbents are unaffected by fixed costs of entry while potential entrants are affected by them because

If a Cournot duopolist announced that it will double its output, the other firm does not view the announcement as credible because

Repeated games are conducive to

A single-period duopoly firm can choose output level A or B. The firm decides it will produce level A regardless of what the other firm produces. This decision may occur because

-The above figure shows the payoff to two airlines, A and B, of serving a particular route. If the two airlines must decide simultaneously, which one of the following statements is TRUE?

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $30 fee is required to enter the market. If firm A chooses its strategy first, then

-The above figure shows the payoff for two firms, A and B, that must each choose to sell either at a high or low price. Determine the dominant strategies for each firm (if any)and the Nash equilibria (if any).

Which auctioned good is more likely to have a common value across potential bidders?

-The above figure shows a payoff matrix for two firms, A and B, that must choose between selling basic computers or advanced computers. Firm B's dominant strategy

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. If firm A chooses its strategy first, then

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

A private auction is an auction in which

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters