Question 1

One way to avoid holdups is to

Accepted Answer

A) use contracts. 
B) vertically integrate. 
C) use multiple sources. 
D) All of the above. 
A) use contracts. 
B) vertically integrate. 
C) use multiple sources. 
D) All of the above. D

Question 2

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

Accepted Answer

A) has lower costs than the follower. 
B) chooses its output to manipulate the follower to produce the output that most benefits the leader. 
C) reacts to the follower's decision. 
D) differentiates its output. 
A) has lower costs than the follower. 
B) chooses its output to manipulate the follower to produce the output that most benefits the leader. 
C) reacts to the follower's decision. 
D) differentiates its output. B

Question 3

-With regard to preventing entry, if identical firms act simultaneously

Accepted Answer

A) they cannot credibly threaten each other. 
B) they will all incur losses. 
C) only one firm will enter the market. 
D) none of them will enter the market. 
A) they cannot credibly threaten each other. 
B) they will all incur losses. 
C) only one firm will enter the market. 
D) none of them will enter the market. A

Question 4

When there's uncertainty as to the length of a game

Accepted Answer

A) cooperation still does not occur, because cooperation unravels at the beginning of the game. 
B) cooperation can potentially occur if trigger strategies are adopted. 
C) firms will cooperate because they treat the game as one that is infinitely repeated. 
D) firms will randomly pick among the Nash equilibria. 
A) cooperation still does not occur, because cooperation unravels at the beginning of the game. 
B) cooperation can potentially occur if trigger strategies are adopted. 
C) firms will cooperate because they treat the game as one that is infinitely repeated. 
D) firms will randomly pick among the Nash equilibria.

Question 5

If there are low barriers to entry, a monopolist

Accepted Answer

A) might undertake investment to lower marginal cost in the face of a potential rival. 
B) will undertake investment to lower marginal cost in order to increase profits. 
C) will not undertake investment to lower marginal cost under any circumstances because profits are lower. 
D) Both A and B. 
A) might undertake investment to lower marginal cost in the face of a potential rival. 
B) will undertake investment to lower marginal cost in order to increase profits. 
C) will not undertake investment to lower marginal cost under any circumstances because profits are lower. 
D) Both A and B.

Question 6

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. The potential entrant cannot earn a profit if the incumbent

Accepted Answer

A) chooses the Cournot level of output. 
B) chooses the Stackelberg leader level of output. 
C) shuts down. 
D) deters entry. 
A) chooses the Cournot level of output. 
B) chooses the Stackelberg leader level of output. 
C) shuts down. 
D) deters entry.

Question 7

An incumbent's threat to use limit pricing if a firm enters the market

Accepted Answer

A) is credible if the firms have identical costs and market demand supports both firms. 
B) is credible if the firms have different costs and market demand won't support both firms. 
C) is not credible if the firms have different costs and market demand won't support both firms. 
D) is cheap talk, because the other firm will enter and the incumbent will still be able to charge monopoly pricing. 
A) is credible if the firms have identical costs and market demand supports both firms. 
B) is credible if the firms have different costs and market demand won't support both firms. 
C) is not credible if the firms have different costs and market demand won't support both firms. 
D) is cheap talk, because the other firm will enter and the incumbent will still be able to charge monopoly pricing.

Question 8

In the mini-case on pay-for-delay

Accepted Answer

A) incumbents are attempting to delay entry of generic drugs. 
B) the deals incumbents made with potential entrants may be illegal. 
C) the deals are only profitable for approximately six months. 
D) All of the above. 
A) incumbents are attempting to delay entry of generic drugs. 
B) the deals incumbents made with potential entrants may be illegal. 
C) the deals are only profitable for approximately six months. 
D) All of the above.

Question 9

Regarding fixed costs of entry

Accepted Answer

A) both incumbents and potential entrants are affected by them. 
B) potential entrants are affected by them while incumbents are not. 
C) neither incumbents nor potential entrants consider them. 
D) incumbent's decisions are affected by them, while the potential entrant ignores them. 
A) both incumbents and potential entrants are affected by them. 
B) potential entrants are affected by them while incumbents are not. 
C) neither incumbents nor potential entrants consider them. 
D) incumbent's decisions are affected by them, while the potential entrant ignores them.

Question 10

If a monopolist faces entry by a potential rival, investing to lower its marginal cost

Accepted Answer

A) is a credible way to deter entry. 
B) is not a credible threat. 
C) is credible but will not deter entry. 
D) will not occur, even when there are no barriers to entry. 
A) is a credible way to deter entry. 
B) is not a credible threat. 
C) is credible but will not deter entry. 
D) will not occur, even when there are no barriers to entry.

Question 11

A disadvantage of moving too quickly is that

Accepted Answer

A) costs of entry are higher. 
B) the likelihood of misunderstanding the demand is greater. 
C) followers gain an advantage by learning from the first-mover. 
D) All of the above. 
A) costs of entry are higher. 
B) the likelihood of misunderstanding the demand is greater. 
C) followers gain an advantage by learning from the first-mover. 
D) All of the above.

Question 12

-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.

Question 13

When a prisoners' dilemma game is repeated a finite number of times (T)

Accepted Answer

A) cooperation unravels during the first round of the game, resulting in the static game Nash equilibrium. 
B) cooperation continues until the T-2 round, where the players will switch to a non-cooperative Nash equilibrium. 
C) firms cooperate and achieve the collusive Nash equilibrium for all rounds. 
D) None of the above. 
A) cooperation unravels during the first round of the game, resulting in the static game Nash equilibrium. 
B) cooperation continues until the T-2 round, where the players will switch to a non-cooperative Nash equilibrium. 
C) firms cooperate and achieve the collusive Nash equilibrium for all rounds. 
D) None of the above.

Question 14

Designing your products with proprietary technology, is a way to

Accepted Answer

A) protect intellectual property. 
B) increase switching costs for your customers. 
C) grandfather in your products. 
D) decrease your marginal cost. 
A) protect intellectual property. 
B) increase switching costs for your customers. 
C) grandfather in your products. 
D) decrease your marginal cost.

Question 15

Assume a firm is a monopoly and enjoys $10 million in profits per year. The firm lobbies to have a moratorium passed by Congress on new firms in its market for the next 25 years. If there is no discount rate, how much would any firm(s)arguing against the moratorium be willing to spend to block it?

Accepted Answer

A) something less than $250 million 
B) $250 million 
C) $251 million 
D) $250 billion 
A) something less than $250 million 
B) $250 million 
C) $251 million 
D) $250 billion

Question 16

-In a Stackelberg game, a monopolist could deter entry from a potential rival by

Accepted Answer

A) telling the potential rival not to enter. 
B) strategically moving first. 
C) moving to a Bertrand model. 
D) None of the above. 
A) telling the potential rival not to enter. 
B) strategically moving first. 
C) moving to a Bertrand model. 
D) None of the above.

Question 17

A player that starts at the end of the game and progresses to the first move to determine best responses

Accepted Answer

A) doesn't understand how to play a game. 
B) is acting irrationally. 
C) is using backward induction. 
D) is using the Stackelberg Strategy. 
A) doesn't understand how to play a game. 
B) is acting irrationally. 
C) is using backward induction. 
D) is using the Stackelberg Strategy.

Question 18

In a repeated prisoners' dilemma game

Accepted Answer

A) the players act sequentially. 
B) the outcomes are the same as in a static prisoners' dilemma game. 
C) firms' choices are not influenced by their opponents' actions. 
D) cooperation may result if the game is played indefinitely. 
A) the players act sequentially. 
B) the outcomes are the same as in a static prisoners' dilemma game. 
C) firms' choices are not influenced by their opponents' actions. 
D) cooperation may result if the game is played indefinitely.

Question 19

Dynamic and static games have outcomes that

Accepted Answer

A) may be different. 
B) are always different. 
C) are not Nash equilibria. 
D) result from dominant strategies. 
A) may be different. 
B) are always different. 
C) are not Nash equilibria. 
D) result from dominant strategies.

Question 20

-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.

One way to avoid holdups is to

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

-With regard to preventing entry, if identical firms act simultaneously

When there's uncertainty as to the length of a game

If there are low barriers to entry, a monopolist

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. The potential entrant cannot earn a profit if the incumbent

An incumbent's threat to use limit pricing if a firm enters the market

In the mini-case on pay-for-delay

Regarding fixed costs of entry

If a monopolist faces entry by a potential rival, investing to lower its marginal cost

A disadvantage of moving too quickly is 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

When a prisoners' dilemma game is repeated a finite number of times (T)

Designing your products with proprietary technology, is a way to

Assume a firm is a monopoly and enjoys $10 million in profits per year. The firm lobbies to have a moratorium passed by Congress on new firms in its market for the next 25 years. If there is no discount rate, how much would any firm(s)arguing against the moratorium be willing to spend to block it?

-In a Stackelberg game, a monopolist could deter entry from a potential rival by

A player that starts at the end of the game and progresses to the first move to determine best responses

In a repeated prisoners' dilemma game

Dynamic and static games have outcomes that

-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

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 13: Strategies Over Time

One way to avoid holdups is to

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

-With regard to preventing entry, if identical firms act simultaneously

When there's uncertainty as to the length of a game

If there are low barriers to entry, a monopolist

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. The potential entrant cannot earn a profit if the incumbent

An incumbent's threat to use limit pricing if a firm enters the market

In the mini-case on pay-for-delay

Regarding fixed costs of entry

If a monopolist faces entry by a potential rival, investing to lower its marginal cost

A disadvantage of moving too quickly is 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

When a prisoners' dilemma game is repeated a finite number of times (T)

Designing your products with proprietary technology, is a way to

Assume a firm is a monopoly and enjoys $10 million in profits per year. The firm lobbies to have a moratorium passed by Congress on new firms in its market for the next 25 years. If there is no discount rate, how much would any firm(s)arguing against the moratorium be willing to spend to block it?

-In a Stackelberg game, a monopolist could deter entry from a potential rival by

A player that starts at the end of the game and progresses to the first move to determine best responses

In a repeated prisoners' dilemma game

Dynamic and static games have outcomes that

-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

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters