Question 1

Which of the following is a way to deter entry?

Accepted Answer

A) increase costs through legislation that affects only new entrants 
B) raise switching costs for customers that use your products 
C) obtain a patent so that others must license your invention 
D) All of the above. 
A) increase costs through legislation that affects only new entrants 
B) raise switching costs for customers that use your products 
C) obtain a patent so that others must license your invention 
D) All of the above.

Question 2

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $30 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 3

In a beauty contest game such as predicting the average of respondents choosing a number between 0 and 100

Accepted Answer

A) the outcome is not normally the Nash equilibrium for the game. 
B) the winner usually exhibits level-3 reasoning. 
C) the winner must understand the non-rationality of the players. 
D) All of the above. 
A) the outcome is not normally the Nash equilibrium for the game. 
B) the winner usually exhibits level-3 reasoning. 
C) the winner must understand the non-rationality of the players. 
D) All of the above.

Question 4

-Deterring entry might require a firm to

Accepted Answer

A) price their product closer to the competitive price than to the monopoly price. 
B) price their product closer to the monopoly price than to the competitive price. 
C) drop output almost to zero to show the consumers "who's boss." 
D) drop price almost to zero to get price below marginal cost. 
A) price their product closer to the competitive price than to the monopoly price. 
B) price their product closer to the monopoly price than to the competitive price. 
C) drop output almost to zero to show the consumers "who's boss." 
D) drop price almost to zero to get price below marginal cost.

Question 5

In a tit-for-tat strategy, a player

Accepted Answer

A) randomly punishes its rival. 
B) ensures that the joint profit is maximized in each round. 
C) copies the action of its rival's prior move in the subsequent rounds. 
D) maximizes the joint profit in the game. 
A) randomly punishes its rival. 
B) ensures that the joint profit is maximized in each round. 
C) copies the action of its rival's prior move in the subsequent rounds. 
D) maximizes the joint profit in the game.

Question 6

Implicit collusion, where players do NOT have an explicit agreement

Accepted Answer

A) are strictly prohibited under antitrust laws. 
B) are not strictly prohibited under antitrust laws. 
C) results in cheating. 
D) maximizes total surplus in the market. 
A) are strictly prohibited under antitrust laws. 
B) are not strictly prohibited under antitrust laws. 
C) results in cheating. 
D) maximizes total surplus in the market.

Question 7

Incumbents are unaffected by fixed costs of entry while potential entrants are affected by them because

Accepted Answer

A) for potential entrants the cost is avoidable, while for the incumbent, it is not. 
B) fixed costs will be greater for the potential entrant than for the incumbent. 
C) fixed costs are zero for the incumbent. 
D) incumbents will act to prevent entry at all costs. 
A) for potential entrants the cost is avoidable, while for the incumbent, it is not. 
B) fixed costs will be greater for the potential entrant than for the incumbent. 
C) fixed costs are zero for the incumbent. 
D) incumbents will act to prevent entry at all costs.

Question 8

If Intel moves first and makes a large investment in a chip fabrication plant in Bolivia in exchange for tax credits, Intel has made ________ and Bolivia ________.

Accepted Answer

A) a tactical error; will nationalize the plant 
B) a specific investment; will create the tax credit 
C) a specific investment; has a hostage 
D) a general investment; no longer has to grant the tax credits 
A) a tactical error; will nationalize the plant 
B) a specific investment; will create the tax credit 
C) a specific investment; has a hostage 
D) a general investment; no longer has to grant the tax credits

Question 9

By vertically integrating, two firms can

Accepted Answer

A) increase market share. 
B) avoid holdup problems. 
C) limit the problems inherent in moving too quickly. 
D) avoid antitrust issues. 
A) increase market share. 
B) avoid holdup problems. 
C) limit the problems inherent in moving too quickly. 
D) avoid antitrust issues.

Question 10

In the beauty contest where players predict the outcome of players choosing a number between 0 and 100

Accepted Answer

A) the Nash equilibrium is 0. 
B) your prediction should be based on what you think the winning number will be. 
C) the Nash equilibrium is 33. 
D) there is no Nash equilibrium because people are not rational. 
A) the Nash equilibrium is 0. 
B) your prediction should be based on what you think the winning number will be. 
C) the Nash equilibrium is 33. 
D) there is no Nash equilibrium because people are not rational.

Question 11

If a Cournot duopolist announced that it will double its output, the other firm does not view the announcement as credible because

Accepted Answer

A) the announcing firm's profits will fall if it carries out the threat. 
B) the other firm's profits will fall if the announcing firm carries out the threat. 
C) the other firm's profits will rise if the announcing firm carries out the threat. 
D) the other firm will double output also. 
A) the announcing firm's profits will fall if it carries out the threat. 
B) the other firm's profits will fall if the announcing firm carries out the threat. 
C) the other firm's profits will rise if the announcing firm carries out the threat. 
D) the other firm will double output also.

Question 12

In a Stackelberg oligopoly

Accepted Answer

A) the leader moves first, and the follower chooses its price in the second stage of the game. 
B) the leader moves first, and the follower chooses its output in the second stage of the game. 
C) both firms act simultaneously, but one chooses price and the other output level. 
D) there is no Nash equilibrium. 
A) the leader moves first, and the follower chooses its price in the second stage of the game. 
B) the leader moves first, and the follower chooses its output in the second stage of the game. 
C) both firms act simultaneously, but one chooses price and the other output level. 
D) there is no Nash equilibrium.

Question 13

A specific investment is

Accepted Answer

A) one that can only be used in a transaction with a single firm. 
B) an investment that cannot be physically moved, such as an oil refinery. 
C) reduces the possibility of a holdup occurring. 
D) is more expensive than a general investment. 
A) one that can only be used in a transaction with a single firm. 
B) an investment that cannot be physically moved, such as an oil refinery. 
C) reduces the possibility of a holdup occurring. 
D) is more expensive than a general investment.

Question 14

If firms execute a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

Accepted Answer

A) undefined. 
B) the non-cooperative Nash equilibrium. 
C) the collusive Nash equilibrium. 
D) economically inefficient. 
A) undefined. 
B) the non-cooperative Nash equilibrium. 
C) the collusive Nash equilibrium. 
D) economically inefficient.

Question 15

-The ability to deter entry requires

Accepted Answer

A) a credible threat that if entry occurs the firm is willing to produce more than they would otherwise. 
B) a credible threat that if entry occurs the firm will not produce more than they would otherwise. 
C) a good lawyer. 
D) a clever accounting department. 
A) a credible threat that if entry occurs the firm is willing to produce more than they would otherwise. 
B) a credible threat that if entry occurs the firm will not produce more than they would otherwise. 
C) a good lawyer. 
D) a clever accounting department.

Question 16

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.

Question 17

If firms have different costs and market demand only supports the quantity the incumbent produces, then the incumbent's threat to use limit pricing

Accepted Answer

A) is credible. 
B) is not credible. 
C) would be illegal. 
D) is unable to be determined with the information given. 
A) is credible. 
B) is not credible. 
C) would be illegal. 
D) is unable to be determined with the information given.

Question 18

Repeated games are conducive to

Accepted Answer

A) explicit cooperation. 
B) tacit cooperation. 
C) corruption. 
D) failing to have a Nash equilibrium. 
A) explicit cooperation. 
B) tacit cooperation. 
C) corruption. 
D) failing to have a Nash equilibrium.

Question 19

In the ultimatum game, one reason players don't choose the rational offer is

Accepted Answer

A) that there are too many possible outcomes to reasonably consider. 
B) they are worse off by taking the offer. 
C) they prefer to sacrifice to punish "unfair" behavior. 
D) that it is not a Nash equilibrium. 
A) that there are too many possible outcomes to reasonably consider. 
B) they are worse off by taking the offer. 
C) they prefer to sacrifice to punish "unfair" behavior. 
D) that it is not a Nash equilibrium.

Question 20

If firms adopt a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

Accepted Answer

A) undefined. 
B) the noncooperative Nash equilibrium. 
C) the collusive Nash equilibrium. 
D) economically inefficient. 
A) undefined. 
B) the noncooperative Nash equilibrium. 
C) the collusive Nash equilibrium. 
D) economically inefficient.

Which of the following is a way to deter entry?

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $30 fee is required to enter the market. If firm A chooses its strategy first, then

In a beauty contest game such as predicting the average of respondents choosing a number between 0 and 100

-Deterring entry might require a firm to

In a tit-for-tat strategy, a player

Implicit collusion, where players do NOT have an explicit agreement

Incumbents are unaffected by fixed costs of entry while potential entrants are affected by them because

If Intel moves first and makes a large investment in a chip fabrication plant in Bolivia in exchange for tax credits, Intel has made and Bolivia .

By vertically integrating, two firms can

In the beauty contest where players predict the outcome of players choosing a number between 0 and 100

If a Cournot duopolist announced that it will double its output, the other firm does not view the announcement as credible because

In a Stackelberg oligopoly

A specific investment is

If firms execute a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

-The ability to deter entry requires

With regard to preventing entry, if identical firms act simultaneously

If firms have different costs and market demand only supports the quantity the incumbent produces, then the incumbent's threat to use limit pricing

Repeated games are conducive to

In the ultimatum game, one reason players don't choose the rational offer is

If firms adopt a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

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

Which of the following is a way to deter entry?

-The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $30 fee is required to enter the market. If firm A chooses its strategy first, then

In a beauty contest game such as predicting the average of respondents choosing a number between 0 and 100

-Deterring entry might require a firm to

In a tit-for-tat strategy, a player

Implicit collusion, where players do NOT have an explicit agreement

Incumbents are unaffected by fixed costs of entry while potential entrants are affected by them because

If Intel moves first and makes a large investment in a chip fabrication plant in Bolivia in exchange for tax credits, Intel has made ________ and Bolivia ________.

By vertically integrating, two firms can

In the beauty contest where players predict the outcome of players choosing a number between 0 and 100

If a Cournot duopolist announced that it will double its output, the other firm does not view the announcement as credible because

In a Stackelberg oligopoly

A specific investment is

If firms execute a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

-The ability to deter entry requires

With regard to preventing entry, if identical firms act simultaneously

If firms have different costs and market demand only supports the quantity the incumbent produces, then the incumbent's threat to use limit pricing

Repeated games are conducive to

In the ultimatum game, one reason players don't choose the rational offer is

If firms adopt a strategy that triggers a permanent punishment, the result in an indefinitely repeated game is

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

If Intel moves first and makes a large investment in a chip fabrication plant in Bolivia in exchange for tax credits, Intel has made and Bolivia .