Question 1

Which of the following circumstances in an industry will result in a Nash equilibrium?

Accepted Answer

A)  All firms have a dominant strategy and each firm chooses its dominant strategy. 
B)  All firms have a dominant strategy, but only some choose to follow it. 
C)  All firms have a dominant strategy, and none choose it. 
D)  None of the above is correct. 
A)  All firms have a dominant strategy and each firm chooses its dominant strategy. 
B)  All firms have a dominant strategy, but only some choose to follow it. 
C)  All firms have a dominant strategy, and none choose it. 
D)  None of the above is correct. A

Question 2

Sequential games can be solved using

Accepted Answer

A)  tit-for-tat. 
B)  dominated strategies. 
C)  backward induction. 
D)  risk averaging. 
A)  tit-for-tat. 
B)  dominated strategies. 
C)  backward induction. 
D)  risk averaging. C

Question 3

Consider the following game:
$\begin{array}{|c|c|c|c|}
&&\text { player II}\
\hline && \text { A } & \text { B } \
\hline\text { player I}& \text { A } & (150,150) & (0,200) \
\hline &\text { B } & (250,0) & (300,300) \
\hline
\end{array}$ How many (if any) Nash equilibria does this game have?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
A)  0 
B)  1 
C)  2 
D)  3 B

Question 4

Which of the following is an example of a game theory strategy?

Accepted Answer

A)  You scratch my back and I'll scratch yours. 
B)  If the shoe fits, wear it. 
C)  Monkey see, monkey do. 
D)  None of the above is correct. 
A)  You scratch my back and I'll scratch yours. 
B)  If the shoe fits, wear it. 
C)  Monkey see, monkey do. 
D)  None of the above is correct.

Question 5

A market has only two sellers. They are both trying to decide on a pricing strategy. If both firms charge a high price, then each firm will experience a 10 percent increase in profits. If both firms charge a low price, then each firm will experience a 5 percent decrease in profits. If Firm 1 charges a low price and Firm 2 charges a high price, then Firm 1 will experience a 6 percent increase in profits and Firm 2 will experience a 2 percent decrease in profits. If Firm 2 charges a low price and Firm 1 charges a high price, then Firm 2 will experience a 7 percent increase in profits and Firm 1 will experience a 3 percent decrease in profits.
(i) Construct a payoff matrix for this game.
(ii) Determine whether each firm has a dominant strategy and, if it does, identify the strategy.
(iii) Determine the optimal strategy for each firm.
(iv) Determine the Nash equilibrium.
(v) Is this a prisoners' dilemma? How do you know?

Accepted Answer

The answer of A market has only two sellers. They...

Question 6

A dominant strategy equilibrium is always a Nash equilibrium.

Accepted Answer

A) True 
 B)False

Question 7

Until recently, medical doctors and lawyers have been prohibited from engaging in competitive advertising. If the prisoners' dilemma applies to this situation, then the presence of this restriction would be likely to

Accepted Answer

A)  increase profits earned by individuals in these professions. 
B)  reduce profits earned by individuals in these professions. 
C)  have no effect on the profits earned by individuals in these professions. 
D)  increase the profits of some and reduce the profits of other individuals in these professions. 
A)  increase profits earned by individuals in these professions. 
B)  reduce profits earned by individuals in these professions. 
C)  have no effect on the profits earned by individuals in these professions. 
D)  increase the profits of some and reduce the profits of other individuals in these professions.

Question 8

Firm A and Firm B operate retail malls. Both are trying to determine whether to increase advertising budgets during the holiday season or to keep them constant. Because of contract cycles, Firm A will have to make a commitment regarding an advertising budget before Firm B. Their alternatives and payoffs are displayed in the decision tree diagram. Use this information to determine each firm's optimal strategy and anticipated payoff.

Accepted Answer

The answer of Firm A and Firm B operate retail...

Question 9

A game that involves interrelated decisions that are made over time is a

Accepted Answer

A)  sequential game. 
B)  repeated game. 
C)  zero-sum game. 
D)  nonzero-sum game. 
A)  sequential game. 
B)  repeated game. 
C)  zero-sum game. 
D)  nonzero-sum game.

Question 10

Consider the following simultaneous move game:
$\begin{array}{|c|c|c|c|}
&&\text { player II}\
\hline && \text { A } & \text { B } \
\hline\text { player I}& \text { A } & (100,100) & (0,200) \
\hline &\text { B } & (200,0) & (300,300) \
\hline
\end{array}$ The matrix above represents the payoffs to each player (I and Ii)based on their selected strategies (A and B) . For example, if player I selects B as its strategy and player II selects A, then the payoffs will be 200 to player I and 0 to player II. What is the dominant strategy for player II in this game?

Accepted Answer

A)  A 
B)  B 
C)  Both 
D)  None 
A)  A 
B)  B 
C)  Both 
D)  None

Question 11

Which of the following is a nonzero-sum game?

Accepted Answer

A)  Drag racing 
B)  Checkers 
C)  Competing for market share. 
D)  None of the above is correct. 
A)  Drag racing 
B)  Checkers 
C)  Competing for market share. 
D)  None of the above is correct.

Question 12

Consider the following simultaneous move game:
  The matrix above represents the decisions and payoffs to Firm A and Firm B. If Firm A chooses low price, what is the best response of Firm B?

Accepted Answer

A)  High price 
B)  Low price 
C)  Both equal 
D)  None 
A)  High price 
B)  Low price 
C)  Both equal 
D)  None

Question 13

Which of the following is a nonzero-sum game?

Accepted Answer

A)  Chess 
B)  Poker 
C)  Rock, paper, scissors 
D)  None of the above is correct. 
A)  Chess 
B)  Poker 
C)  Rock, paper, scissors 
D)  None of the above is correct.

Question 14

Both firms decided to increase advertising and, as a result, more customers were attracted to the market and both firms posted higher profits. This is an example of zero-sum-game.

Accepted Answer

A) True 
 B)False

Question 15

A plan of action of an oligopolist after taking into consideration reactions of the competitors is best known as

Accepted Answer

A)  dominant strategy. 
B)  Nash behavior. 
C)  strategic behavior. 
D)  none of the above 
A)  dominant strategy. 
B)  Nash behavior. 
C)  strategic behavior. 
D)  none of the above

Question 16

Consider the following simultaneous move game:
  The matrix above represents the decisions and payoffs to Firm A and Firm B. If Firm A chooses high price, what is the best response of Firm B?

Accepted Answer

A)  High price 
B)  Low price 
C)  Both equal 
D)  None 
A)  High price 
B)  Low price 
C)  Both equal 
D)  None

Question 17

A tit-for-tat strategy makes it possible for firms to cooperate without colluding.

Accepted Answer

A) True 
 B)False

Question 18

Two grocery stores compete against each other in a community. Both are considering an increase in advertising expenditures. Their interdependent alternatives are described by the payoff matrix.
 $$\begin{array} { | l | l | l | l | } 
\hline & &  { \text { Firm 2 } } \
\hline & & \text { Advertise } & \text { Don't Advertise } \
\hline  { \text { Firm 1 } } & \text { Advertise } & ( 7,7 ) & ( 4,8 ) \
\hline  & \text { Don'tAdvertise } & ( 1,1 ) & ( 5,4 ) \
\hline
\end{array}$$ (i) Determine whether each firm has a dominant strategy and, if it does, identify the strategy.
(ii) Determine the optimal strategy for each firm.
(iii) Determine the Nash equilibrium.
(iv) Is this a prisoners' dilemma? How do you know?

Accepted Answer

The answer of Two grocery stores compete against each other...

Question 19

A prisoners' dilemma is a game with all of the following characteristics except one. Which one is not present in a prisoners' dilemma?

Accepted Answer

A)  Players cooperate in arriving at their strategies. 
B)  Both players have a dominant strategy. 
C)  Both players would be better off if neither chose his or her dominant strategy. 
D)  The payoff from a strategy depends on the choice made by the other player. 
A)  Players cooperate in arriving at their strategies. 
B)  Both players have a dominant strategy. 
C)  Both players would be better off if neither chose his or her dominant strategy. 
D)  The payoff from a strategy depends on the choice made by the other player.

Question 20

Suppose that the firms in an oligopolistic market engage in a price war and, as a result, all firms earn lower profits. Game theory would describe this as

Accepted Answer

A)  an irrational strategy. 
B)  a prisoners' dilemma. 
C)  price leadership. 
D)  a contestable market. 
A)  an irrational strategy. 
B)  a prisoners' dilemma. 
C)  price leadership. 
D)  a contestable market.

Which of the following circumstances in an industry will result in a Nash equilibrium?

Sequential games can be solved using

Consider the following game: player II A B player I A (150,150) (0,200) B (250,0) (300,300) How many (if any) Nash equilibria does this game have?

Which of the following is an example of a game theory strategy?

A dominant strategy equilibrium is always a Nash equilibrium.

Until recently, medical doctors and lawyers have been prohibited from engaging in competitive advertising. If the prisoners' dilemma applies to this situation, then the presence of this restriction would be likely to

A game that involves interrelated decisions that are made over time is a

Which of the following is a nonzero-sum game?

Consider the following simultaneous move game: The matrix above represents the decisions and payoffs to Firm A and Firm B. If Firm A chooses low price, what is the best response of Firm B?

Which of the following is a nonzero-sum game?

Both firms decided to increase advertising and, as a result, more customers were attracted to the market and both firms posted higher profits. This is an example of zero-sum-game.

A plan of action of an oligopolist after taking into consideration reactions of the competitors is best known as

Consider the following simultaneous move game: The matrix above represents the decisions and payoffs to Firm A and Firm B. If Firm A chooses high price, what is the best response of Firm B?

A tit-for-tat strategy makes it possible for firms to cooperate without colluding.

A prisoners' dilemma is a game with all of the following characteristics except one. Which one is not present in a prisoners' dilemma?

Suppose that the firms in an oligopolistic market engage in a price war and, as a result, all firms earn lower profits. Game theory would describe this as

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

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Exam 11: Game Theory and Strategic Behavior

Which of the following circumstances in an industry will result in a Nash equilibrium?

Sequential games can be solved using

Consider the following game: player II A B player I A (150,150) (0,200) B (250,0) (300,300) How many (if any) Nash equilibria does this game have?

Which of the following is an example of a game theory strategy?

A dominant strategy equilibrium is always a Nash equilibrium.

Until recently, medical doctors and lawyers have been prohibited from engaging in competitive advertising. If the prisoners' dilemma applies to this situation, then the presence of this restriction would be likely to

A game that involves interrelated decisions that are made over time is a

Which of the following is a nonzero-sum game?

Consider the following simultaneous move game: The matrix above represents the decisions and payoffs to Firm A and Firm B. If Firm A chooses low price, what is the best response of Firm B?

Which of the following is a nonzero-sum game?

Both firms decided to increase advertising and, as a result, more customers were attracted to the market and both firms posted higher profits. This is an example of zero-sum-game.

A plan of action of an oligopolist after taking into consideration reactions of the competitors is best known as

Consider the following simultaneous move game: The matrix above represents the decisions and payoffs to Firm A and Firm B. If Firm A chooses high price, what is the best response of Firm B?

A tit-for-tat strategy makes it possible for firms to cooperate without colluding.

A prisoners' dilemma is a game with all of the following characteristics except one. Which one is not present in a prisoners' dilemma?

Suppose that the firms in an oligopolistic market engage in a price war and, as a result, all firms earn lower profits. Game theory would describe this as

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

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