Question 1

In games that play out over time, the phrase "look forward" means to:

Accepted Answer

A) have hope and a positive attitude about possibilities. 
B) anticipate the likely consequences of choices. 
C) make sure all of other players options are considered. 
D) recognize that options can change over time. 
A) have hope and a positive attitude about possibilities. 
B) anticipate the likely consequences of choices. 
C) make sure all of other players options are considered. 
D) recognize that options can change over time.

Question 2

Use the table with data for Tasha and Hui Er to answer the question.
Tasha tries to put herself in Hui Er's place. Tasha concludes that if she (Tasha), charges $9, then Hui Er will charge _____ to earn a profit of _____.
$$\text { Table: Tasha's Car Wash and Hui Er's Car Wash }\
\begin{array}{l}
\begin{array} { | l | l | l | } 
\hline &  { \text { Tasha's price } = \$ 5 } & { \text { Tasha's price } = \$ 9 } \
\hline \text { Hui Er's price } = \$ 5 & \begin{array} { l } 
\text { Hui Er's profit } = \$ 3,000 \
\text { Tasha's profit } = \$ 3,000
\end{array} & \begin{array} { l } 
\text { Hui Er's profit } = \$ 6,000 \
\text { Tasha's profit } = \$ 700
\end{array} \
\hline \text { Hui Er's price } = \$ 9 & \begin{array} { l } 
\text { Hui Er's profit } = \$ 700 \
\text { Tasha's profit } = \$ 6,000
\end{array} & \begin{array} { l } 
\text { Hui Er's profit } = \$ 5,000 \
\text { Tasha's profit } = \$ 5,000
\end{array} \
\hline
\end{array}
\end{array}$$

Accepted Answer

A) $9; $3,000 
B) $9; $700 
C) $5; $6,000 
D) $5; $5,000 
A) $9; $3,000 
B) $9; $700 
C) $5; $6,000 
D) $5; $5,000

Question 3

What advantage might a second-mover gain?

Accepted Answer

A) the flexibility to adapt a strategy based on what the first mover did 
B) the time to consider options more thoroughly 
C) the avoidance of failure if the first mover fails 
D) the assurance of a better result 
A) the flexibility to adapt a strategy based on what the first mover did 
B) the time to consider options more thoroughly 
C) the avoidance of failure if the first mover fails 
D) the assurance of a better result

Question 4

Cooperation between Coke and Pepsi is difficult because each business can increase profits by:

Accepted Answer

A) producing less than the collusive quantity. 
B) producing more than the quantity that maximizes joint profits. 
C) charging less than the price that maximizes joint profits. 
D) advertising more than will maximize joint profits. 
A) producing less than the collusive quantity. 
B) producing more than the quantity that maximizes joint profits. 
C) charging less than the price that maximizes joint profits. 
D) advertising more than will maximize joint profits.

Question 5

Three basic approaches to solving coordination problems are:

Accepted Answer

A) focal points and norms, laws and regulations, and check marks. 
B) communication, focal points and norms, and revolution. 
C) revolution, laws and regulations, and communication. 
D) laws and regulations, communication, and focal points and norms. 
A) focal points and norms, laws and regulations, and check marks. 
B) communication, focal points and norms, and revolution. 
C) revolution, laws and regulations, and communication. 
D) laws and regulations, communication, and focal points and norms.

Question 6

Suppose that Big & Tall and Short & Sweet are two clothing manufacturers and each chooses independently whether to advertise or not advertise. If neither advertises, each gets $100 million in profit; if both advertise, their profits are $50 million each; and if one advertises, while the other does not, the advertiser gets $150 million in profit, and the other gets $20 million in profit. What are the MOST likely strategies of the two firms?

Accepted Answer

A) Both may or may not advertise. 
B) One will advertise, and the other will not. 
C) Both will advertise. 
D) Neither will advertise. 
A) Both may or may not advertise. 
B) One will advertise, and the other will not. 
C) Both will advertise. 
D) Neither will advertise.

Question 7

Which of the following statements is FALSE regarding a Nash equilibrium?

Accepted Answer

A) Each player's expectation of the other player's strategy is correct. 
B) Cooperation between the players could not improve the outcome. 
C) All players choose their best response to the strategy they expect the other player will choose. 
D) No player can do better by unilaterally changing his or her choice. 
A) Each player's expectation of the other player's strategy is correct. 
B) Cooperation between the players could not improve the outcome. 
C) All players choose their best response to the strategy they expect the other player will choose. 
D) No player can do better by unilaterally changing his or her choice.

Question 8

Cooperation requires:

Accepted Answer

A) common goals and methods. 
B) coordination regarding who does what. 
C) no more than one player. 
D) interaction but not coordination. 
A) common goals and methods. 
B) coordination regarding who does what. 
C) no more than one player. 
D) interaction but not coordination.

Question 9

(Figure: Prisoners' Dilemma for Thelma and Louise) Use Figure: Prisoners' Dilemma for Thelma and Louise. Thelma and Louise are arrested and jailed for bank robbery. Given the payoff matrix in the figure, Thelma and Louise would minimize their joint sentence if Thelma _____ and Louise ____.
​

Accepted Answer

A) confesses; does not confess 
B) confesses; confesses 
C) does not confess; confesses 
D) does not confess; does not confess 
A) confesses; does not confess 
B) confesses; confesses 
C) does not confess; confesses 
D) does not confess; does not confess

Question 10

A basic logic that applies to all strategic interactions is:

Accepted Answer

A) making a good choice requires that you anticipate what others will do. 
B) action should not be taken until there is a clear best choice. 
C) risk must be eliminated. 
D) games should be avoided, so that decisions can be based on facts. 
A) making a good choice requires that you anticipate what others will do. 
B) action should not be taken until there is a clear best choice. 
C) risk must be eliminated. 
D) games should be avoided, so that decisions can be based on facts.

Question 11

"Playing games" is another term for engaging in:

Accepted Answer

A) strategic interactions. 
B) independent actions. 
C) rivalry investments. 
D) alternative theory. 
A) strategic interactions. 
B) independent actions. 
C) rivalry investments. 
D) alternative theory.

Question 12

Use the table with data for Maria and Jose to answer the question.
If Jose charges $4, then Maria's best option would be to charge _____ in order to earn _____.
$\text { Table: Maria and Jose Produce Strawberry Jam }$
$\begin{array}{|l|l|l|}
\hline & {\begin{array}{c}
\text { Jose charges } \$ 8 \text { per } \
\text { jar. }
\end{array}} & \text { Jose charges } \$ 4 \text { per jar. } \
\hline \begin{array}{l}
\text { Maria charges } \$ 8 \text { per } \
\text { jar. }
\end{array} & \begin{array}{l}
\text { Maria earns } \$ 200 \text {, and } \
\text { Jose earns } \$ 180 .
\end{array} & \begin{array}{l}
\text { Maria earns } \$ 50 \text {, and } \
\text { Jose earns } \$ 280 .
\end{array} \
\hline \begin{array}{l}
\text { Maria charges } \$ 4 \text { per } \
\text { jar. }
\end{array} & \begin{array}{l}
\text { Maria earns } \$ 300 \text {, and } \
\text { Jose earns } \$ 40 .
\end{array} & \begin{array}{l}
\text { Maria earns } \$ 180 \text {, and } \
\text { Jose earns } \$ 150 .
\end{array} \
\hline
\end{array}$

Accepted Answer

A) $8; $200 
B) $8; $50 
C) $4; $300 
D) $4; $180 
A) $8; $200 
B) $8; $50 
C) $4; $300 
D) $4; $180

Question 13

Suppose that Avery and Stacey are going shopping at the local mall and that each decides independently whether to buy many items or few items. If both shoppers buy a few items, both will receive 70 utils; if both buy many items, both will receive 100 utils. If one buys many items, and the other buys few items, the one who buys many items will receive 150 utils, while the other will receive 40 utils. What is Avery's BEST response?

Accepted Answer

A) Buy many items. 
B) Buy a few items. 
C) Do whatever Stacey does. 
D) Avery does not have a best response. 
A) Buy many items. 
B) Buy a few items. 
C) Do whatever Stacey does. 
D) Avery does not have a best response.

Question 14

Use the table with data for Vlad and Assad to answer the question.
If Vlad charges $1, then Assad should charge _____. If Vlad charges $3, then Assad should charge _____.
$\text { Table: Profits for Vlad's and Assad's Cookie Companies }$
$\begin{array}{|l|l|l|}
\hline
&\begin{array}{c}
\text { Assad charges } \$ 1 \text { per } \
\text { cookie. }\
\end{array}&\begin{array}{c}
\text { Assad charges } \$ 3 \text { per } \
\text { cookie. }
\end{array}\
\hline \begin{array}{l}
\text { Vlad charges } \$ 1 \text { per } \
\text { cookie. }
\end{array} & \begin{array}{l}
\text { Vlad's profits }=\$ 2,000 \
\text { Assad's profits }=\$ 2,000
\end{array} & \begin{array}{l}
\text { Vlad's profits }=\$ 3,500 \
\text { Assad's profits }=\$ 500
\end{array} \
\hline \begin{array}{l}
\text { Vlad charges } \$ 3 \text { per } \
\text { cookie. }
\end{array} & \begin{array}{l}
\text { Vlad's profits }=\$ 500 \
\text { Assad's profits }=\$ 3,500
\end{array} & \begin{array}{l}
\text { Vlad's profits }=\$ 3,000 \
\text { Assad's profits }=\$ 3,000
\end{array} \
\hline
\end{array}$

Accepted Answer

A) $1, $1 
B) $1; $3 
C) $3; $1 
D) $3; $3 
A) $1, $1 
B) $1; $3 
C) $3; $1 
D) $3; $3

Question 15

Explain when it is better to be a first mover and when it is better to be a second mover.

Accepted Answer

The answer of Explain when it is better to be...

Question 16

The Prisoner's Dilemma shows how markets:

Accepted Answer

A) deliver the best possible outcomes. 
B) are based on collusive agreements in most cases. 
C) can deliver bad outcomes. 
D) minimize costs. 
A) deliver the best possible outcomes. 
B) are based on collusive agreements in most cases. 
C) can deliver bad outcomes. 
D) minimize costs.

Question 17

(Figure: Payoff Matrix for the United States and Canada) Use Figure: Payoff Matrix for the United States and Canada. Suppose that the United States and Canada both produce quinoa, and each country can earn more profit if output is limited and the price of quinoa is high. The BEST response for the United States is:
​

Accepted Answer

A) low output. 
B) high output. 
C) adopt a tit for tat strategy. 
D) The United States does not have a best response. 
A) low output. 
B) high output. 
C) adopt a tit for tat strategy. 
D) The United States does not have a best response.

Question 18

(Figure: Payoff Matrix for Alex and Sybil) Use Figure: Payoff Matrix for Alex and Sybil. Alex and Sybil are the only producers of frozen yogurt in their town. Every week, each decides how much frozen yogurt to produce for the following week. The figure shows the profit per week earned by their two firms. The BEST response for Sybil is:
​

Accepted Answer

A) low output. 
B) high output 
C) low output when Alex produces a high output. 
D) high output when Alex produces a low output. 
A) low output. 
B) high output 
C) low output when Alex produces a high output. 
D) high output when Alex produces a low output.

Question 19

The tragedy of commons is due to:

Accepted Answer

A) excessive cooperation to extract maximum group profits. 
B) a failure to cooperate so that all players take only their fair share. 
C) a failure to reach a Nash equilibrium. 
D) demand exceeding supply when payoffs are considered. 
A) excessive cooperation to extract maximum group profits. 
B) a failure to cooperate so that all players take only their fair share. 
C) a failure to reach a Nash equilibrium. 
D) demand exceeding supply when payoffs are considered.

Question 20

Which of the following is NOT one of the four steps for making good strategic decisions?

Accepted Answer

A) Consider only the most favorable outcomes. 
B) Think about the "what ifs" separately. 
C) Play your best response. 
D) Put yourself in other people's shoes. 
A) Consider only the most favorable outcomes. 
B) Think about the "what ifs" separately. 
C) Play your best response. 
D) Put yourself in other people's shoes.

Exam 18: Game Theory and Strategic Choices

In games that play out over time, the phrase "look forward" means to:

What advantage might a second-mover gain?

Cooperation between Coke and Pepsi is difficult because each business can increase profits by:

Three basic approaches to solving coordination problems are:

Which of the following statements is FALSE regarding a Nash equilibrium?

Cooperation requires:

(Figure: Prisoners' Dilemma for Thelma and Louise) Use Figure: Prisoners' Dilemma for Thelma and Louise. Thelma and Louise are arrested and jailed for bank robbery. Given the payoff matrix in the figure, Thelma and Louise would minimize their joint sentence if Thelma _____ and Louise ____. ​

A basic logic that applies to all strategic interactions is:

"Playing games" is another term for engaging in:

Explain when it is better to be a first mover and when it is better to be a second mover.

The Prisoner's Dilemma shows how markets:

The tragedy of commons is due to:

Which of the following is NOT one of the four steps for making good strategic decisions?

The Core Principles of Economics

Demand: Thinking Like a Buyer

Supply: Thinking Like a Seller

Equilibrium: Where Supply Meets Demand

Elasticity: Measuring Responsiveness

When Governments Intervene in Markets

Welfare and Efficiency

Gains From Trade

International Trade

Externalities and Public Goods

Labor Demand and Supply

Wages, Workers, and Management

Inequality, Social Insurance, and Redistribution

Market Structure and Market Power

Entry, Exit, and Long-Run Profitability

Business Strategy

Sophisticated Pricing Strategies

Decisions Involving Uncertainty

Decisions With Private Information

Sizing up the Economy Using Gdp

Economic Growth

Unemployment

Inflation and Money

Consumption and Saving

Investment

The Financial Sector

International Finance and the Exchange Rate

Business Cycles

IS-MP Analysis: Interest Rates and Output

Phillips Curve

The Fed Model: Linking Interest Rates, Output, and Inflation

Aggregate Demand and Aggregate Supply

Monetary Policy

Government Spending, Taxes, and Fiscal Policy

Appendix: Aggregate Expenditure and the Multiplier

Filters

(Figure: Prisoners' Dilemma for Thelma and Louise) Use Figure: Prisoners' Dilemma for Thelma and Louise. Thelma and Louise are arrested and jailed for bank robbery. Given the payoff matrix in the figure, Thelma and Louise would minimize their joint sentence if Thelma _ and Louise .