Question 1

An incumbent's threat to retaliate after a potential competitor enters the market will be taken seriously by potential competitors if

Accepted Answer

A) the incumbent can still earn a profit after carrying out the threat. 
B) the incumbent earns greater profit carrying out the threat than by accommodating entry. 
C) the potential entrant cannot earn a profit if the threat is carried out. 
D) the potential entrant's profit exceeds the incumbent's if the threat is carried out. 
A) the incumbent can still earn a profit after carrying out the threat. 
B) the incumbent earns greater profit carrying out the threat than by accommodating entry. 
C) the potential entrant cannot earn a profit if the threat is carried out. 
D) the potential entrant's profit exceeds the incumbent's if the threat is carried out.

Question 2

A holdup problem occurs

Accepted Answer

A) when a financial institution undertakes too little investment in security. 
B) when one firm must make a specific investment and a second firm takes advantage of it. 
C) if the firm that moves second in a Stackelberg game chooses the incorrect output level. 
D) if you are entering into a contract with a government entity. 
A) when a financial institution undertakes too little investment in security. 
B) when one firm must make a specific investment and a second firm takes advantage of it. 
C) if the firm that moves second in a Stackelberg game chooses the incorrect output level. 
D) if you are entering into a contract with a government entity.

Question 3

A sub-game perfect Nash equilibrium is defined as

Accepted Answer

A) a set of strategies that are a Nash equilibrium in every subgame of a static game. 
B) a set of strategies that are a Nash equilibrium in every subgame of a dynamic game. 
C) a set of strategies that are a Nash equilibrium in a single subgame of a dynamic game. 
D) the game within the game. 
A) a set of strategies that are a Nash equilibrium in every subgame of a static game. 
B) a set of strategies that are a Nash equilibrium in every subgame of a dynamic game. 
C) a set of strategies that are a Nash equilibrium in a single subgame of a dynamic game. 
D) the game within the game.

Question 4

Which of the following is a dynamic game?

Accepted Answer

A) rock-paper-scissors (Roshambo) 
B) flipping pennies 
C) chess 
D) None of the above. 
A) rock-paper-scissors (Roshambo) 
B) flipping pennies 
C) chess 
D) None of the above.

Question 5

Which of the following is a sequential game?

Accepted Answer

A) rock-paper-scissors (Roshambo) 
B) paintball 
C) Monopoly 
D) boxing 
A) rock-paper-scissors (Roshambo) 
B) paintball 
C) Monopoly 
D) boxing

Question 6

An incumbent announces it will significantly increase output in the next period, but only has contracts for the amount produced this period. The announcement is a

Accepted Answer

A) credible threat. 
B) non-credible threat. 
C) commitment. 
D) mixed strategy. 
A) credible threat. 
B) non-credible threat. 
C) commitment. 
D) mixed strategy.

Question 7

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the incumbent will deter entry because

Accepted Answer

A) it is more profitable than accommodating entry. 
B) it increases consumer surplus. 
C) the potential entrant winds up with zero profit. 
D) the incumbent would earn zero profit if it accommodated entry. 
A) it is more profitable than accommodating entry. 
B) it increases consumer surplus. 
C) the potential entrant winds up with zero profit. 
D) the incumbent would earn zero profit if it accommodated entry.

Question 8

An incumbent monopolist producing more output than necessary might be able to keep potential rivals from entering

Accepted Answer

A) by flooding the market with products below its marginal cost in the short run. 
B) if learning by doing reduces marginal cost. 
C) if the long-run marginal cost can be lowered below the potential entrant's short-run marginal cost. 
D) All of the above. 
A) by flooding the market with products below its marginal cost in the short run. 
B) if learning by doing reduces marginal cost. 
C) if the long-run marginal cost can be lowered below the potential entrant's short-run marginal cost. 
D) All of the above.

Question 9

In an ultimatum game where the payoff totals $100 and is split in $1 increments, the rational amount for the proposer to offer and the responder to take is

Accepted Answer

A) $0. 
B) $1. 
C) $50. 
D) $100. 
A) $0. 
B) $1. 
C) $50. 
D) $100.

Question 10

An exclusion contract

Accepted Answer

A) is a form of entry deferral. 
B) gives a firm the right to be the exclusive provider of a good in a particular market. 
C) may not always be profitable for the incumbent. 
D) All of the above. 
A) is a form of entry deferral. 
B) gives a firm the right to be the exclusive provider of a good in a particular market. 
C) may not always be profitable for the incumbent. 
D) All of the above.

Question 11

Behavioral game theory assumes

Accepted Answer

A) people act rationally. 
B) people are subject to biases that cause them to act irrationally. 
C) that people behave differently when playing games than when "playing for real." 
D) people optimize using all available information. 
A) people act rationally. 
B) people are subject to biases that cause them to act irrationally. 
C) that people behave differently when playing games than when "playing for real." 
D) people optimize using all available information.

Question 12

The Cournot and Stackelberg models are similar, EXCEPT Cournot ________ and Stackelberg ________.

Accepted Answer

A) sets price; sets output 
B) sets output; sets price 
C) is dynamic; is static 
D) is static; is dynamic 
A) sets price; sets output 
B) sets output; sets price 
C) is dynamic; is static 
D) is static; is dynamic

Question 13

A disadvantage of moving too quickly is that

Accepted Answer

A) costs of entry are higher. 
B) consumers aren't loyal. 
C) firms are subject to holdup problems. 
D) All of the above. 
A) costs of entry are higher. 
B) consumers aren't loyal. 
C) firms are subject to holdup problems. 
D) All of the above.

Question 14

Behavioral game theory assumes

Accepted Answer

A) people act rationally. 
B) people have limited calculation capability or psychological biases that cause them to act irrationally. 
C) that people behave differently when playing games than when "playing for real." 
D) people overcome their psychological biases. 
A) people act rationally. 
B) people have limited calculation capability or psychological biases that cause them to act irrationally. 
C) that people behave differently when playing games than when "playing for real." 
D) people overcome their psychological biases.

Question 15

An incumbent firm uses limit pricing

Accepted Answer

A) to set price below a potential rival's marginal cost, thus making entry unprofitable. 
B) to set one price for a quantity of a good below a certain limit, and a second price for purchases above the limit. 
C) when it has no other advantages over a potential rival. 
D) if it is limited in the quantity of inputs it can purchase to produce output. 
A) to set price below a potential rival's marginal cost, thus making entry unprofitable. 
B) to set one price for a quantity of a good below a certain limit, and a second price for purchases above the limit. 
C) when it has no other advantages over a potential rival. 
D) if it is limited in the quantity of inputs it can purchase to produce output.

Question 16

The trench warfare case during World War I is an example of a(n)

Accepted Answer

A) tit-for-tat strategy. 
B) explicit agreement. 
C) non-cooperative Nash equilibrium. 
D) None of the above. 
A) tit-for-tat strategy. 
B) explicit agreement. 
C) non-cooperative Nash equilibrium. 
D) None of the above.

Question 17

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $60 fee is required to enter the market. If firm A chooses its strategy first, then

Accepted Answer

A) firm A will not enter. 
B) neither firm will enter. 
C) both firms will enter. 
D) firm A will enter and firm B will not. 
A) firm A will not enter. 
B) neither firm will enter. 
C) both firms will enter. 
D) firm A will enter and firm B will not.

Question 18

In an ultimatum game

Accepted Answer

A) non-profit-maximizing behavior often occurs. 
B) players move simultaneously. 
C) players act in an economically rational way. 
D) one player receives nothing. 
A) non-profit-maximizing behavior often occurs. 
B) players move simultaneously. 
C) players act in an economically rational way. 
D) one player receives nothing.

Question 19

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 the firm be willing to pay to deter entry?

Accepted Answer

A) $250 million 
B) $25 million 
C) $100 million 
D) $250 billion 
A) $250 million 
B) $25 million 
C) $100 million 
D) $250 billion

Question 20

A dynamic game is a game

Accepted Answer

A) in which the players are highly animated. 
B) that is sequential or repeated. 
C) where the payoffs change frequently. 
D) that has actions instead of strategies. 
A) in which the players are highly animated. 
B) that is sequential or repeated. 
C) where the payoffs change frequently. 
D) that has actions instead of strategies.

An incumbent's threat to retaliate after a potential competitor enters the market will be taken seriously by potential competitors if

A holdup problem occurs

A sub-game perfect Nash equilibrium is defined as

Which of the following is a dynamic game?

Which of the following is a sequential game?

An incumbent announces it will significantly increase output in the next period, but only has contracts for the amount produced this period. The announcement is a

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the incumbent will deter entry because

An incumbent monopolist producing more output than necessary might be able to keep potential rivals from entering

In an ultimatum game where the payoff totals $100 and is split in $1 increments, the rational amount for the proposer to offer and the responder to take is

An exclusion contract

Behavioral game theory assumes

The Cournot and Stackelberg models are similar, EXCEPT Cournot and Stackelberg .

A disadvantage of moving too quickly is that

Behavioral game theory assumes

An incumbent firm uses limit pricing

The trench warfare case during World War I is an example of a(n)

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $60 fee is required to enter the market. If firm A chooses its strategy first, then

In an ultimatum game

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 the firm be willing to pay to deter entry?

A dynamic game is a game

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

An incumbent's threat to retaliate after a potential competitor enters the market will be taken seriously by potential competitors if

A holdup problem occurs

A sub-game perfect Nash equilibrium is defined as

Which of the following is a dynamic game?

Which of the following is a sequential game?

An incumbent announces it will significantly increase output in the next period, but only has contracts for the amount produced this period. The announcement is a

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the incumbent will deter entry because

An incumbent monopolist producing more output than necessary might be able to keep potential rivals from entering

In an ultimatum game where the payoff totals $100 and is split in $1 increments, the rational amount for the proposer to offer and the responder to take is

An exclusion contract

Behavioral game theory assumes

The Cournot and Stackelberg models are similar, EXCEPT Cournot ________ and Stackelberg ________.

A disadvantage of moving too quickly is that

Behavioral game theory assumes

An incumbent firm uses limit pricing

The trench warfare case during World War I is an example of a(n)

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $60 fee is required to enter the market. If firm A chooses its strategy first, then

In an ultimatum game

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 the firm be willing to pay to deter entry?

A dynamic game is a game

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

The Cournot and Stackelberg models are similar, EXCEPT Cournot and Stackelberg .