Question 1

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 2

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 3

If an incumbent faces an identical potential entrant with no costs of entry,the incumbent will

Accepted Answer

A)  produce the Cournot duopolist level of output. 
B)  produce the Stackelberg leader level of output. 
C)  set price equal to marginal cost. 
D)  shut down. 
A)  produce the Cournot duopolist level of output. 
B)  produce the Stackelberg leader level of output. 
C)  set price equal to marginal cost. 
D)  shut down.

Question 4

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

Accepted Answer

A)  has lower costs than the follower. 
B)  commits to producing a larger quantity. 
C)  reacts to the follower's decision. 
D)  differentiates its output. 
A)  has lower costs than the follower. 
B)  commits to producing a larger quantity. 
C)  reacts to the follower's decision. 
D)  differentiates its output.

Question 5

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 6

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 7

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 8

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 9

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 10

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.

Question 11

Assume a firm is a monopoly and enjoys $10,000,000 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 12

In a repeated game,deterring entry

Accepted Answer

A)  is not possible. 
B)  is not a rational strategy if money is lost fighting the first potential entrant. 
C)  may require losing money fighting the first potential entrant. 
D)  cannot form a subgame perfect Nash equilibrium. 
A)  is not possible. 
B)  is not a rational strategy if money is lost fighting the first potential entrant. 
C)  may require losing money fighting the first potential entrant. 
D)  cannot form a subgame perfect Nash equilibrium.

Question 13

In an indefinitely repeated game,a firm might use a ________ to ________ a rival that defects from a cooperative strategy.

Accepted Answer

A)  trigger strategy; threaten 
B)  trigger strategy; punish 
C)  legal maneuver; sue 
D)  tacit threat; dissuade 
A)  trigger strategy; threaten 
B)  trigger strategy; punish 
C)  legal maneuver; sue 
D)  tacit threat; dissuade

Question 14

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 15

Assume a firm is a monopoly and enjoys $10,000,000 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

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

In an ultimatum game where the payoff totals $100 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 18

If a Cournot duopolist announced that it will double its output

Accepted Answer

A)  it becomes the leader. 
B)  the other firm does not view the announcement as credible. 
C)  the other firm will shut down. 
D)  the other firm will double output also. 
A)  it becomes the leader. 
B)  the other firm does not view the announcement as credible. 
C)  the other firm will shut down. 
D)  the other firm will double output also.

Question 19

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 20

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.

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

An exclusion contract

If an incumbent faces an identical potential entrant with no costs of entry,the incumbent will

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

The ability to deter entry requires

Which of the following is a way to deter entry?

A specific investment is

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

In a Stackelberg oligopoly

A dynamic game is a game

Assume a firm is a monopoly and enjoys $10,000,000 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?

In a repeated game,deterring entry

In an indefinitely repeated game,a firm might use a to a rival that defects from a cooperative strategy.

Behavioral game theory assumes

Assume a firm is a monopoly and enjoys $10,000,000 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?

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

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

If a Cournot duopolist announced that it will double its output

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

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

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

An exclusion contract

If an incumbent faces an identical potential entrant with no costs of entry,the incumbent will

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

The ability to deter entry requires

Which of the following is a way to deter entry?

A specific investment is

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

In a Stackelberg oligopoly

A dynamic game is a game

Assume a firm is a monopoly and enjoys $10,000,000 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?

In a repeated game,deterring entry

In an indefinitely repeated game,a firm might use a ________ to ________ a rival that defects from a cooperative strategy.

Behavioral game theory assumes

Assume a firm is a monopoly and enjoys $10,000,000 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?

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

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

If a Cournot duopolist announced that it will double its output

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

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

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

In an indefinitely repeated game,a firm might use a to a rival that defects from a cooperative strategy.