Question 1

After the deregulation of the airline industry, the new airlines had a competitive cost advantage over the older ones as:

Accepted Answer

A) they could practice price discrimination. 
B) they did not bear any legacy cost. 
C) they enjoyed economies of scale. 
D) they had to pay lower fuel surcharge. 
A) they could practice price discrimination. 
B) they did not bear any legacy cost. 
C) they enjoyed economies of scale. 
D) they had to pay lower fuel surcharge. B

Question 2

What is the difference between a solution to a game in a pure strategy and a mixed strategy situation?

Accepted Answer

For solutions in pure strategies a player picks a single action and exercises it with certainty.In a mixed strategy situation one does best by unpredictably mixing one's strategies in accordance with probabilities that depend on the strategies of the others.

Question 3

The figure given below represents the output choices of each of the two oligopolists, given the choices of its competitor.QA and QB are the quantities of output produced by Producer A and Producer B.The marginal cost of production is zero for both producers.

-Refer to Figure .If the two producers agree to act as a single monopoly firm, what will be the total output produced in the economy?

Accepted Answer

A) 10 units 
B) 6 units 
C) 12 units 
D) 3 units 
A) 10 units 
B) 6 units 
C) 12 units 
D) 3 units B

Question 4

Assume that in a price-fixing game, if Player A breaks the agreement in the first year, she earns $11 while Player B earns $5.However, if Player A breaks the agreement once, Player B decides to break the agreement for eternity, leaving each to receive $8 per year for the rest of their lives.If they both keep the agreement each receives $9 per year for the rest of their life.If the discount rate is 120 percent per period:

Accepted Answer

A) Player A will prefer to break the agreement in the first year. 
B) Player A will prefer to break the agreement in the second year. 
C) Player A will prefer to keep the agreement throughout her life. 
D) Player A will prefer to keep the agreement only for the first five years. 
A) Player A will prefer to break the agreement in the first year. 
B) Player A will prefer to break the agreement in the second year. 
C) Player A will prefer to keep the agreement throughout her life. 
D) Player A will prefer to keep the agreement only for the first five years.

Question 5

In the long run, if new fringe firms with same cost structures as existing fringe firms enter the oligopoly market:

Accepted Answer

A) the dominant firm's ability to extract profit from the market decreases. 
B) the fringe's ability to extract profit from the market decreases. 
C) the fringe supply curve rotates leftward and downward. 
D) the dominant firm's residual demand curve rotates rightward. 
A) the dominant firm's ability to extract profit from the market decreases. 
B) the fringe's ability to extract profit from the market decreases. 
C) the fringe supply curve rotates leftward and downward. 
D) the dominant firm's residual demand curve rotates rightward.

Question 6

The following matrix represents the payoffs to two producers, each making a strategic choice either to keep the output at 5 units or at 10 units.

-Refer to Table .Which of the following payoffs would be received by the two players if both decide to break the agreement?

Accepted Answer

A) Each player would enjoy profits worth $50. 
B) Each player would incur a loss worth $10. 
C) Each player would enjoy profits worth $20. 
D) Each player would enjoy profits worth $100. 
A) Each player would enjoy profits worth $50. 
B) Each player would incur a loss worth $10. 
C) Each player would enjoy profits worth $20. 
D) Each player would enjoy profits worth $100.

Question 7

The following matrix represents the payoffs to two producers, each making a strategic choice either to keep the output at 5 units or at 10 units.

-Refer to Table .The matrix shown in this table is known as the:

Accepted Answer

A) matrix of choices. 
B) matrix of strategies. 
C) normal form of the game. 
D) advanced form of the game. 
A) matrix of choices. 
B) matrix of strategies. 
C) normal form of the game. 
D) advanced form of the game.

Question 8

How does a dominant firm try to prevent new competitors from entering the oligopoly market?

Accepted Answer

The higher the profits of the dominant f

Question 9

If two players in an oligopoly game enter into an agreement whereby one player makes a grim trigger, the other player will honor the agreement only if its (i.e.the other's) annual discount rate is high.

Accepted Answer

A) True 
 B)False

Question 10

High barriers to entry protect the market power of existing firms and discourage the formation of firms which:

Accepted Answer

A) invest heavily in research and development activities. 
B) use illegal procedures to capture the market. 
C) are inefficiently small and cannot realize economies of scale. 
D) are large enough to dominate the existing firms. 
A) invest heavily in research and development activities. 
B) use illegal procedures to capture the market. 
C) are inefficiently small and cannot realize economies of scale. 
D) are large enough to dominate the existing firms.

Question 11

Why did the attempts by some airlines to introduce uniform pricing for all air trips in 1980s and 1990s fail?

Accepted Answer

As soon as new higher fares were announc

Question 12

Decsribe the mechanism by which two oligopolists reach an equilibrium in the Cournot duopoly model.

Accepted Answer

The basic assumption in the Cournot mode

Question 13

The principle of backward induction proves that in price-fixing oligopoly games:

Accepted Answer

A) the players honor the agreement if the game is repeated. 
B) the players honor the agreement if the game is played five times. 
C) the players dishonor the agreement if the game is not played more than twice. 
D) the players dishonor the agreement if the game is repeated a number of times, as determined prior to the start of play. 
A) the players honor the agreement if the game is repeated. 
B) the players honor the agreement if the game is played five times. 
C) the players dishonor the agreement if the game is not played more than twice. 
D) the players dishonor the agreement if the game is repeated a number of times, as determined prior to the start of play.

Question 14

In oligopoly outcomes, the dominant firm's profitability depends on how the fringe, consisting of small competing sellers, responds to its choices.

Accepted Answer

A) True 
 B)False

Question 15

Games with a finite number of strategies do not always have a Nash equilibrium.

Accepted Answer

A) True 
 B)False

Question 16

Suppose Chord are Fredler are two automobile manufacturers, each of whom is deciding whether to launch a new model of car or increase the production of their existing models.The payoffs which each receive are provided in the matrix given below.

-Refer to Table .Which of the following strategic choices represents the Nash equilibrium?

Accepted Answer

A) Chord increases the production of existing cars and Fredler launches a new model of car; Chord launches a new model of car and Fredler increases production. 
B) Both Chord and Fredler launch new models of cars. 
C) Both Chord and Fredler increase production of their existing cars. 
D) Chord increases production and Fredler decides to launch a new model of car. 
A) Chord increases the production of existing cars and Fredler launches a new model of car; Chord launches a new model of car and Fredler increases production. 
B) Both Chord and Fredler launch new models of cars. 
C) Both Chord and Fredler increase production of their existing cars. 
D) Chord increases production and Fredler decides to launch a new model of car.

Question 17

In the long run, even if new fringe firms enter the oligopoly market, the dominant firm's profit will remain unaltered.

Accepted Answer

A) True 
 B)False

Question 18

Assume that in a price-fixing game, if Player A breaks the agreement in the first year, she earns $11 while Player B earns $5.However, if Player A breaks the agreement once, Player B decides to break the agreement for eternity, leaving each to receive $8 per year for the rest of their lives.If they both keep the agreement each receives $9 per year for the rest of their lives.If the discount rate is 30 percent per period:

Accepted Answer

A) Player A will prefer to break the agreement in the first year. 
B) Player A will prefer to break the agreement in the second year. 
C) Player A will prefer to keep the agreement throughout her life. 
D) Player A will prefer to keep the agreement only for the first five years. 
A) Player A will prefer to break the agreement in the first year. 
B) Player A will prefer to break the agreement in the second year. 
C) Player A will prefer to keep the agreement throughout her life. 
D) Player A will prefer to keep the agreement only for the first five years.

Question 19

In a first-price auction:

Accepted Answer

A) the lowest bidder receives its actual bid as a payment for the job. 
B) the lowest bidder wins the bid and pays the amount bid by the first runner-up. 
C) the bidder bids less than its cost and incurs a loss. 
D) the lowest bidder wins the bid and has to pay the actual bid for the good. 
A) the lowest bidder receives its actual bid as a payment for the job. 
B) the lowest bidder wins the bid and pays the amount bid by the first runner-up. 
C) the bidder bids less than its cost and incurs a loss. 
D) the lowest bidder wins the bid and has to pay the actual bid for the good.

Question 20

One of the possible reasons for high sales and steady profit margins of General Motors, Ford, and Chrysler during 1950s and 1960s were aggressive pricing and design innovations.

Accepted Answer

A) True 
 B)False

After the deregulation of the airline industry, the new airlines had a competitive cost advantage over the older ones as:

What is the difference between a solution to a game in a pure strategy and a mixed strategy situation?

In the long run, if new fringe firms with same cost structures as existing fringe firms enter the oligopoly market:

The following matrix represents the payoffs to two producers, each making a strategic choice either to keep the output at 5 units or at 10 units. -Refer to Table .Which of the following payoffs would be received by the two players if both decide to break the agreement?

The following matrix represents the payoffs to two producers, each making a strategic choice either to keep the output at 5 units or at 10 units. -Refer to Table .The matrix shown in this table is known as the:

How does a dominant firm try to prevent new competitors from entering the oligopoly market?

If two players in an oligopoly game enter into an agreement whereby one player makes a grim trigger, the other player will honor the agreement only if its (i.e.the other's) annual discount rate is high.

High barriers to entry protect the market power of existing firms and discourage the formation of firms which:

Why did the attempts by some airlines to introduce uniform pricing for all air trips in 1980s and 1990s fail?

Decsribe the mechanism by which two oligopolists reach an equilibrium in the Cournot duopoly model.

The principle of backward induction proves that in price-fixing oligopoly games:

In oligopoly outcomes, the dominant firm's profitability depends on how the fringe, consisting of small competing sellers, responds to its choices.

Games with a finite number of strategies do not always have a Nash equilibrium.

In the long run, even if new fringe firms enter the oligopoly market, the dominant firm's profit will remain unaltered.

In a first-price auction:

One of the possible reasons for high sales and steady profit margins of General Motors, Ford, and Chrysler during 1950s and 1960s were aggressive pricing and design innovations.

Reasoning With Economics: Models and Information

Transactions and Institutions: the Building Blocks

Markets

Cost and Production

Extreme Markets I: Perfect Competition

Extreme Markets II: Monopoly

Competition and Strategy

Beyond Markets; Property and Contracts

The Economics of Contracts

Risk and Information in Contracts

Organizations in Concept and Practice

Organizational Design

Vertical Relationships

Employment Relationships

Time, Risk and Options

Conflict, Negotiation and Group Choice

Filters

Exam 7: Between the Extremes: Interaction and Strategy

After the deregulation of the airline industry, the new airlines had a competitive cost advantage over the older ones as:

What is the difference between a solution to a game in a pure strategy and a mixed strategy situation?

In the long run, if new fringe firms with same cost structures as existing fringe firms enter the oligopoly market:

The following matrix represents the payoffs to two producers, each making a strategic choice either to keep the output at 5 units or at 10 units. -Refer to Table .Which of the following payoffs would be received by the two players if both decide to break the agreement?

The following matrix represents the payoffs to two producers, each making a strategic choice either to keep the output at 5 units or at 10 units. -Refer to Table .The matrix shown in this table is known as the:

How does a dominant firm try to prevent new competitors from entering the oligopoly market?

If two players in an oligopoly game enter into an agreement whereby one player makes a grim trigger, the other player will honor the agreement only if its (i.e.the other's) annual discount rate is high.

High barriers to entry protect the market power of existing firms and discourage the formation of firms which:

Why did the attempts by some airlines to introduce uniform pricing for all air trips in 1980s and 1990s fail?

Decsribe the mechanism by which two oligopolists reach an equilibrium in the Cournot duopoly model.

The principle of backward induction proves that in price-fixing oligopoly games:

In oligopoly outcomes, the dominant firm's profitability depends on how the fringe, consisting of small competing sellers, responds to its choices.

Games with a finite number of strategies do not always have a Nash equilibrium.

In the long run, even if new fringe firms enter the oligopoly market, the dominant firm's profit will remain unaltered.

In a first-price auction:

One of the possible reasons for high sales and steady profit margins of General Motors, Ford, and Chrysler during 1950s and 1960s were aggressive pricing and design innovations.

Reasoning With Economics: Models and Information

Transactions and Institutions: the Building Blocks

Markets

Cost and Production

Extreme Markets I: Perfect Competition

Extreme Markets II: Monopoly

Competition and Strategy

Beyond Markets; Property and Contracts

The Economics of Contracts

Risk and Information in Contracts

Organizations in Concept and Practice

Organizational Design

Vertical Relationships

Employment Relationships

Time, Risk and Options

Conflict, Negotiation and Group Choice

Filters