The firms shown in the following table wish to increase their sales by either advertising or decreasing their price. What is the optimal strategy for each form according to the table, with DEF's payoff listed in the top row of each outcome? $\begin{array}{c} \quad \quad \quad \quad \quad \quad \quad \quad \quad {\text { ABC, Inc. }} \\ \begin{array}{llll} & & \text { Advertise } & \text { Cut price } \\ & \text { Advertise } & \$ 1.0 \mathrm{M} & \$ 0.5 \mathrm{M} \\ \text { DEF, Inc. } & & \$ 1.0 \mathrm{M} & \$ 2.0 \mathrm{M} \\ & \text { Cut price } & \$ 2.0 \mathrm{M} & \$ 0.75 \mathrm{M} \\ & & \$ 0.5 \mathrm{M} & \$ 0.75 \mathrm{M} \end{array}\end{array}$

We can look at this problem from the per

(Table) Based on the game theory table for Barbara and Helen (with Barbara's profits in regular text and Helen's profits in italics), a clear dominant strategy is that $\begin{array}{c} \text { Barbara's Barbershop }\\ \begin{array}{|l|l|ll|ll|} \hline && {\text { Low Price }} && {\text { High Price }} \\ \hline \text { } &\text { Low Price } & \$ 2,000 & \$ 2,500 & \$ 3,500 & \$ 1,000 \\ \hline& \text { High Price } & \$ 600 & \$ 3,900 & \$ 2,500 & \$ 2,700\\ \hline \end{array}\end{array}$

A) Helen's best move is to charge a low price regardless of what Barbara does. B) Helen's best move is to charge a high price regardless of what Barbara does. C) both Helen and Barbara have a dominant strategy to charge a high price. D) Barbara's best move is to charge a high price when Helen charges a low price. A) Helen's best move is to charge a low price regardless of what Barbara does. B) Helen's best move is to charge a high price regardless of what Barbara does. C) both Helen and Barbara have a dominant strategy to charge a high price. D) Barbara's best move is to charge a high price when Helen charges a low price.

Exam 10: Monopolistic Competition, Oligopoly, and Game Theory

(Table) HH Gregg and Best Buy are competing for sales for their newest high-capacity mobile device battery packs. Each firm has a pricing strategy of either a high price or a low price. Profits for each store are listed in the payoff boxes, with Best Buy's payoff listed first. Based on the table, why is the game characterized as a prisoner's dilemma game? HH Gregg Best Buy High Low High 100,100 30,120 Low 120,30 50,50

(Multiple Choice)

4.8/5

(49)

Question 41

(Table) Based on the game table, where Delta's payoff is listed first, what is the Nash equilibrium pricing strategy?

(Multiple Choice)

4.9/5

(35)

Question 42

Which industry is MOST likely to be monopolistically competitive?

(Multiple Choice)

4.8/5

(39)

Question 43

All players within a game maximizing their expected outcome given the information they have is called a

(Multiple Choice)

4.9/5

(40)

Question 44

What are the two types of advertising?

(Multiple Choice)

4.8/5

(36)

Question 45

Monopolistically competitive firms are similar to perfectly competitive firms in that both

(Multiple Choice)

4.8/5

(37)

Question 46

Sun's Pizza lowered its price on a one-topping pizza. Taylor's Pizzeria lowered its price on a one-topping pizza. Sun's created a secret sauce for its combination pizza. Taylor's created a secret sauce for its combination pizza. The strategy used by Taylor's Pizzeria is known as

(Multiple Choice)

4.8/5

(33)

Question 47

A monopolistically competitive firm will continue to expand output until

(Multiple Choice)

4.8/5

(29)

Question 48

Each oligopolistic firm recognizes that it must take into account the behavior of its competitors when it makes pricing decisions. This recognition is called

(Multiple Choice)

4.9/5

(37)

Question 49

The firms shown in the following table wish to increase their sales by either advertising or decreasing their price. What is the optimal strategy for each form according to the table, with DEF's payoff listed in the top row of each outcome? ABC, Inc. Advertise Cut price Advertise \ 1.0 \ 0.5 DEF, Inc. \ 1.0 \ 2.0 Cut price \ 2.0 \ 0.75 \ 0.5 \ 0.75

(Essay)

4.8/5

(34)

Question 50

The petitioner's game is used to predict the response of an oligopoly to a price decrease by a competitor.

(True/False)

4.9/5

(30)

Question 51

Assume that a monopolistically competitive firm faces the following situation: P = $14; output = 9,000 units; MC = $11; ATC = $18; AVC = $15; and MR = $11. Which statement is correct regarding profit maximization?

(Multiple Choice)

4.7/5

(28)

Question 52

Which is NOT a part of a basic setup to a "game"?

(Multiple Choice)

4.8/5

(36)

Question 53

Product differentiation gives a firm control over prices.

(True/False)

4.9/5

(38)

Question 54

Name and describe the conditions surrounding a Nash equilibrium; explain the importance of the Nash equilibrium to economists.

(Essay)

4.7/5

(29)

Question 55

Which characteristic does monopolistic competition NOT have in common with perfect competition?

(Multiple Choice)

4.8/5

(41)

Question 56

Mutual interdependence means the firm matches the price increases and decreases of its competitors.

(True/False)

4.8/5

(37)

Question 57

In the long run, easy entry and exit result in monopolistically competitive firms earning higher than normal profits.

(True/False)

4.9/5

(41)

Question 58

(Table) Based on the game theory table for Barbara and Helen (with Barbara's profits in regular text and Helen's profits in italics), a clear dominant strategy is that Barbara's Barbershop Low Price High Price Low Price \ 2,000 \ 2,500 \ 3,500 \ 1,000 High Price \ 600 \ 3,900 \ 2,500 \ 2,700

(Multiple Choice)

4.7/5

(37)

Question 59

Both game theory and the kinked demand model assume that

(Multiple Choice)

4.9/5

(41)

Question 60

(Table) Based on the game table, where Delta's payoff is listed first, what is the Nash equilibrium pricing strategy?

Which industry is MOST likely to be monopolistically competitive?

All players within a game maximizing their expected outcome given the information they have is called a

What are the two types of advertising?

Monopolistically competitive firms are similar to perfectly competitive firms in that both

Sun's Pizza lowered its price on a one-topping pizza. Taylor's Pizzeria lowered its price on a one-topping pizza. Sun's created a secret sauce for its combination pizza. Taylor's created a secret sauce for its combination pizza. The strategy used by Taylor's Pizzeria is known as

A monopolistically competitive firm will continue to expand output until

Each oligopolistic firm recognizes that it must take into account the behavior of its competitors when it makes pricing decisions. This recognition is called

The petitioner's game is used to predict the response of an oligopoly to a price decrease by a competitor.

Assume that a monopolistically competitive firm faces the following situation: P = $14; output = 9,000 units; MC = $11; ATC = $18; AVC = $15; and MR = $11. Which statement is correct regarding profit maximization?

Which is NOT a part of a basic setup to a "game"?

Product differentiation gives a firm control over prices.

Name and describe the conditions surrounding a Nash equilibrium; explain the importance of the Nash equilibrium to economists.

Which characteristic does monopolistic competition NOT have in common with perfect competition?

Mutual interdependence means the firm matches the price increases and decreases of its competitors.

In the long run, easy entry and exit result in monopolistically competitive firms earning higher than normal profits.

(Table) Based on the game theory table for Barbara and Helen (with Barbara's profits in regular text and Helen's profits in italics), a clear dominant strategy is that Barbara's Barbershop Low Price High Price Low Price \ 2,000 \ 2,500 \ 3,500 \ 1,000 High Price \ 600 \ 3,900 \ 2,500 \ 2,700

Both game theory and the kinked demand model assume that

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Elasticity

Consumer Choice and Demand

Production and Costs

Perfect Competition

Monopoly

The Labor Market

Land, Capital Markets, and Innovation

Externalities and Public Goods

Network Goods

Poverty and Income Distribution

International Trade

Filters