Question 1

Strategic behavior refers to decisions made in the long run, but not the short run.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following situations is a game theory problem?

Accepted Answer

A)  A perfectly competitive firm determines how much to produce. 
B)  An oligopolist decides whether or not to introduce a new product. 
C)  A monopolist chooses its pricing strategy. 
D)  None of the above is correct. 
A)  A perfectly competitive firm determines how much to produce. 
B)  An oligopolist decides whether or not to introduce a new product. 
C)  A monopolist chooses its pricing strategy. 
D)  None of the above is correct.

Question 3

Two beverage firms compete for sales by increasing advertising. This competition and expenditures on advertising increase the number of sales for the whole industry and they both post high profits. This is an example of

Accepted Answer

A)  a zero-sum game. 
B)  a positive-sum game. 
C)  a negative-sum game. 
D)  none of the above. 
A)  a zero-sum game. 
B)  a positive-sum game. 
C)  a negative-sum game. 
D)  none of the above.

Question 4

A diagram with nodes and connections between them showing possible sequential decisions and outcomes is known as a

Accepted Answer

A)  strategic behavior tree. 
B)  Nash equilibrium tree. 
C)  game theory tree. 
D)  decision tree. 
A)  strategic behavior tree. 
B)  Nash equilibrium tree. 
C)  game theory tree. 
D)  decision tree.

Question 5

Reputation is a source of credible threat.

Accepted Answer

A) True 
 B)False

Question 6

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 best response strategy of player I to player II's choice of strategy A?

Accepted Answer

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

Question 7

A pair of duopolists, Firm A and Firm B, manufacture seasonal toys. Both are planning their pricing strategies for the coming holiday season. The firms will choose between a low price (Low) and a high price (High). Firm A has a more flexible production and distribution system than Firm B and is therefore able to begin the season with one pricing strategy and then adopt a different strategy in midseason. While Firm B is unable to change its strategy in midseason, it can delay making a choice until after Firm A has announced its prices for the first part of the season. The firms' 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 A pair of duopolists, Firm A and...

Question 8

Which of the following is an example of the prisoners' dilemma?

Accepted Answer

A)  Firms in an industry increase their advertising expenditures, causing profits to rise. 
B)  A country provides subsidies to high technology firms, which are consequently able to increase market share. 
C)  Members of a commodity cartel produce excess output, driving down market price. 
D)  All of the above are correct. 
A)  Firms in an industry increase their advertising expenditures, causing profits to rise. 
B)  A country provides subsidies to high technology firms, which are consequently able to increase market share. 
C)  Members of a commodity cartel produce excess output, driving down market price. 
D)  All of the above are correct.

Question 9

A firm's dominant strategy is superior or equivalent to any other available strategy.

Accepted Answer

A) True 
 B)False

Question 10

A pair of duopolists, Firm A and Firm B, manufacture seasonal toys. Both are planning their pricing strategies for the coming holiday season. The firms will choose between a low price (Low) and a high price (High). Firm A has a more flexible production and distribution system than Firm B and is therefore able to begin the season with one pricing strategy and then adopt a different strategy in midseason. While Firm B is unable to change its strategy in midseason, it can delay making a choice until after Firm A has announced its prices for the first part of the season. The firms' 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 A pair of duopolists, Firm A and...

Question 11

A firm that considers the potential reactions of its competitors when it makes a decision

Accepted Answer

A)  is referred to as a price leader. 
B)  is engaged in strategic behavior. 
C)  is engaged in collusion. 
D)  is referred to as a barometric firm. 
A)  is referred to as a price leader. 
B)  is engaged in strategic behavior. 
C)  is engaged in collusion. 
D)  is referred to as a barometric firm.

Question 12

Game theory is concerned with

Accepted Answer

A)  predicting the results of bets placed on games like roulette. 
B)  the choice of an optimal strategy in conflict situations. 
C)  utility maximization by firms in perfectly competitive markets. 
D)  the migration patterns of caribou in Alaska. 
A)  predicting the results of bets placed on games like roulette. 
B)  the choice of an optimal strategy in conflict situations. 
C)  utility maximization by firms in perfectly competitive markets. 
D)  the migration patterns of caribou in Alaska.

Question 13

In a two-player game, which of the following is a Nash equilibrium?

Accepted Answer

A)  Each player chooses a strategy that is optimal given the other's choice. 
B)  The quantity supplied by one player is equal to the quantity demanded by the second player. 
C)  Both players have excess capacity. 
D)  Both players are duopolists in an oligopolistic industry. 
A)  Each player chooses a strategy that is optimal given the other's choice. 
B)  The quantity supplied by one player is equal to the quantity demanded by the second player. 
C)  Both players have excess capacity. 
D)  Both players are duopolists in an oligopolistic industry.

Question 14

Industrial policy

Accepted Answer

A)  is strategic behavior that takes place at the national level. 
B)  may be accomplished by protecting and subsidizing selected industries. 
C)  is intended to provide competitive advantage to selected firms. 
D)  All of the above are correct. 
A)  is strategic behavior that takes place at the national level. 
B)  may be accomplished by protecting and subsidizing selected industries. 
C)  is intended to provide competitive advantage to selected firms. 
D)  All of the above are correct.

Question 15

Which of the following is a zero-sum game?

Accepted Answer

A)  Prisoners dilemma 
B)  Competition for market share 
C)  Pricing strategy 
D)  None of the above is correct. 
A)  Prisoners dilemma 
B)  Competition for market share 
C)  Pricing strategy 
D)  None of the above is correct.

Question 16

When two movie theater chains pay for advertisements proposing that people should "go out and see a show tonight," their expenditures are strategies in a zero-sum game where profit is the payoff.

Accepted Answer

A) True 
 B)False

Question 17

Two auto repairs shops compete against each other in a community. Both are considering an increase in prices charged for car repair services. Their interdependent alternatives are described by the payoff matrix.
(i) Determine whether each firm has a dominant strategy and, if it does, identify the strategy.
 $$\begin{array} { | l | l | l | l | } 
\hline & & { \text { Firm 2 } } \
\hline & & \text { Increase } & \text { Not Increase } \
\hline  { \text { Firm 1 } } & \text { Increase } & ( 9,16 ) & ( 8,15 ) \
\hline & \text { Not Increase } & ( 10,14 ) & ( 7,9 ) \
\hline
\end{array}$$ (ii) Determine the optimal strategy for each firm.

Accepted Answer

The answer of Two auto repairs shops compete against each...

Question 18

Game theory predicts that players will always have a dominant strategy.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following describes a Nash equilibrium?

Accepted Answer

A)  A firm chooses its dominant strategy, if one exists. 
B)  Every competing firm in an industry chooses a strategy that is optimal given the choices of every other firm. 
C)  Market price results in neither a surplus nor a shortage. 
D)  All firms in an industry are earning zero economic profits. 
A)  A firm chooses its dominant strategy, if one exists. 
B)  Every competing firm in an industry chooses a strategy that is optimal given the choices of every other firm. 
C)  Market price results in neither a surplus nor a shortage. 
D)  All firms in an industry are earning zero economic profits.

Question 20

A firm that establishes a reputation for aggressive and irrational behavior may be attempting to establish a credible threat to its competitors.

Accepted Answer

A) True 
 B)False

Strategic behavior refers to decisions made in the long run, but not the short run.

Which of the following situations is a game theory problem?

Two beverage firms compete for sales by increasing advertising. This competition and expenditures on advertising increase the number of sales for the whole industry and they both post high profits. This is an example of

A diagram with nodes and connections between them showing possible sequential decisions and outcomes is known as a

Reputation is a source of credible threat.

Which of the following is an example of the prisoners' dilemma?

A firm's dominant strategy is superior or equivalent to any other available strategy.

A firm that considers the potential reactions of its competitors when it makes a decision

Game theory is concerned with

In a two-player game, which of the following is a Nash equilibrium?

Industrial policy

Which of the following is a zero-sum game?

When two movie theater chains pay for advertisements proposing that people should "go out and see a show tonight," their expenditures are strategies in a zero-sum game where profit is the payoff.

Game theory predicts that players will always have a dominant strategy.

Which of the following describes a Nash equilibrium?

A firm that establishes a reputation for aggressive and irrational behavior may be attempting to establish a credible threat to its competitors.

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

Strategic behavior refers to decisions made in the long run, but not the short run.

Which of the following situations is a game theory problem?

Two beverage firms compete for sales by increasing advertising. This competition and expenditures on advertising increase the number of sales for the whole industry and they both post high profits. This is an example of

A diagram with nodes and connections between them showing possible sequential decisions and outcomes is known as a

Reputation is a source of credible threat.

Which of the following is an example of the prisoners' dilemma?

A firm's dominant strategy is superior or equivalent to any other available strategy.

A firm that considers the potential reactions of its competitors when it makes a decision

Game theory is concerned with

In a two-player game, which of the following is a Nash equilibrium?

Industrial policy

Which of the following is a zero-sum game?

When two movie theater chains pay for advertisements proposing that people should "go out and see a show tonight," their expenditures are strategies in a zero-sum game where profit is the payoff.

Game theory predicts that players will always have a dominant strategy.

Which of the following describes a Nash equilibrium?

A firm that establishes a reputation for aggressive and irrational behavior may be attempting to establish a credible threat to its competitors.

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

Filters