Question 1

One interesting feature of a prisoner's dilemma game is that

Accepted Answer

A)  non-cooperative behavior leads to lower payoffs than cooperative behavior. 
B)  it was only valid before the industrial revolution. 
C)  individuals behave irrationally when they behave non-cooperatively. 
D)  cooperative behavior leads to lower payoffs than non-cooperative behavior. 
A)  non-cooperative behavior leads to lower payoffs than cooperative behavior. 
B)  it was only valid before the industrial revolution. 
C)  individuals behave irrationally when they behave non-cooperatively. 
D)  cooperative behavior leads to lower payoffs than non-cooperative behavior.

Question 2

Suppose two firms,A and B,are simultaneously considering entry into a new market.If neither enters,both earn zero.If both enter,they both lose 100.If one firm enters,it gains 50 while the other earns zero.Set up the payoff matrix for this game and determine if any Nash equilibria exist.Can you predict the outcome? What if firm A gets to decide first?

Accepted Answer

@#IMG-DLM& See the above figure.There are two Nash

Question 3

A player can choose among three strategies: L,C,and R.Strategy C is never a best response to the other player strategies.This means that

Accepted Answer

A)  strategy C is always played. 
B)  strategy C is never played. 
C)  strategy C will be part of a Nash equilibrium. 
D)  strategies L and R are never played. 
A)  strategy C is always played. 
B)  strategy C is never played. 
C)  strategy C will be part of a Nash equilibrium. 
D)  strategies L and R are never played.

Question 4

-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 5

-The above figure shows the payoff for two firms,A and B,that must each choose to sell either at a high or low price.Determine the dominant strategies for each firm (if any)and the Nash equilibria (if any).

Accepted Answer

For both firms the dominant strategy is

Question 6

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,how many pure Nash equilibria are there?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  It cannot be determined. 
A)  0 
B)  1 
C)  2 
D)  It cannot be determined.

Question 7

Before entering,fixed cost associated with the industry in question are sunk costs for

Accepted Answer

A)  the incumbent firm. 
B)  the outside firm. 
C)  both firms. 
D)  neither firm. 
A)  the incumbent firm. 
B)  the outside firm. 
C)  both firms. 
D)  neither firm.

Question 8

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,which one of the following statements is TRUE?

Accepted Answer

A)  Since firm B has no dominant strategy, its decision is unpredictable. 
B)  Since firm B's decision is unpredictable, firm A's decision is unpredictable. 
C)  Neither firm entering is a Nash equilibrium. 
D)  Firm B will not enter because it knows firm A will. 
A)  Since firm B has no dominant strategy, its decision is unpredictable. 
B)  Since firm B's decision is unpredictable, firm A's decision is unpredictable. 
C)  Neither firm entering is a Nash equilibrium. 
D)  Firm B will not enter because it knows firm A will.

Question 9

Which of the following constitutes a mixed strategy Nash equilibrium of the Odds and Evens game?

Accepted Answer

A)  Play Even and Odd with 50% probability each. 
B)  Play Even with 75% probability and Odd with 25% probability. 
C)  Always play Even. 
D)  This game has no mixed strategy Nash equilibrium. 
A)  Play Even and Odd with 50% probability each. 
B)  Play Even with 75% probability and Odd with 25% probability. 
C)  Always play Even. 
D)  This game has no mixed strategy Nash equilibrium.

Question 10

The individual with the highest valuation of the good will win in which of the following auctions?

Accepted Answer

A)  English Auction 
B)  Dutch Auction 
C)  Sealed Bid Auction 
D)  All of the above. 
A)  English Auction 
B)  Dutch Auction 
C)  Sealed Bid Auction 
D)  All of the above.

Question 11

If neither firm has a dominant strategy,a Nash equilibrium cannot exist.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 14

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 15

-The above figure shows the payoff to two firms,A and B,of releasing two versions of a new product.What is Firm A's best response if Firm B decides to release the high price version?

Accepted Answer

A)  Firm A does not have a best response strategy. 
B)  Firm A chooses the low price version. 
C)  Firm A chooses the high price version. 
D)  Both low price and high price versions are best responses for firm A. 
A)  Firm A does not have a best response strategy. 
B)  Firm A chooses the low price version. 
C)  Firm A chooses the high price version. 
D)  Both low price and high price versions are best responses for firm A.

Question 16

A trigger strategy

Accepted Answer

A)  is always a dominant strategy. 
B)  is used to punish the player that reneges on agreements. 
C)  is used to reward the player that never reneges on agreements. 
D)  is a best response whenever all players cooperate. 
A)  is always a dominant strategy. 
B)  is used to punish the player that reneges on agreements. 
C)  is used to reward the player that never reneges on agreements. 
D)  is a best response whenever all players cooperate.

Question 17

A private auction is an auction in which

Accepted Answer

A)  individuals know their own value of the good and everyone else's valuation, too. 
B)  individuals have their own valuation of the good but don't know everyone else's. 
C)  many auctions are auctioned off at the same time. 
D)  only one good is auctioned off. 
A)  individuals know their own value of the good and everyone else's valuation, too. 
B)  individuals have their own valuation of the good but don't know everyone else's. 
C)  many auctions are auctioned off at the same time. 
D)  only one good is auctioned off.

Question 18

What is the primary difference between a mixed strategy and a pure strategy?

Accepted Answer

A)  Pure strategies are always dominated strategies. 
B)  Mixed strategies call for randomizing over possible actions, pure strategies do not. 
C)  Pure strategies are much more common than mixed strategies. 
D)  Mixed strategies are not optimal whereas pure strategies are. 
A)  Pure strategies are always dominated strategies. 
B)  Mixed strategies call for randomizing over possible actions, pure strategies do not. 
C)  Pure strategies are much more common than mixed strategies. 
D)  Mixed strategies are not optimal whereas pure strategies are.

Question 19

-The above figure shows a payoff matrix for two firms,A and B,that must choose between a high-price strategy and a low-price strategy.For firm B,

Accepted Answer

A)  setting a high price is the dominant strategy. 
B)  setting a low price is the dominant strategy. 
C)  there is no dominant strategy. 
D)  doing the opposite of firm A is always the best strategy. 
A)  setting a high price is the dominant strategy. 
B)  setting a low price is the dominant strategy. 
C)  there is no dominant strategy. 
D)  doing the opposite of firm A is always the best strategy.

Question 20

In the 1980s,the USA and the USSR negotiated a reduction in nuclear arms; this is an example of a

Accepted Answer

A)  non-cooperative equilibrium. 
B)  cooperative outcome that may not be a Nash equilibrium. 
C)  cooperative outcome that was a Nash equilibrium. 
D)  sub-game perfect equilibrium. 
A)  non-cooperative equilibrium. 
B)  cooperative outcome that may not be a Nash equilibrium. 
C)  cooperative outcome that was a Nash equilibrium. 
D)  sub-game perfect equilibrium.

One interesting feature of a prisoner's dilemma game is that

A player can choose among three strategies: L,C,and R.Strategy C is never a best response to the other player strategies.This means 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

-The above figure shows the payoff for two firms,A and B,that must each choose to sell either at a high or low price.Determine the dominant strategies for each firm (if any)and the Nash equilibria (if any).

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,how many pure Nash equilibria are there?

Before entering,fixed cost associated with the industry in question are sunk costs for

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,which one of the following statements is TRUE?

Which of the following constitutes a mixed strategy Nash equilibrium of the Odds and Evens game?

The individual with the highest valuation of the good will win in which of the following auctions?

If neither firm has a dominant strategy,a Nash equilibrium cannot exist.

A sub-game perfect Nash equilibrium is defined as

If a Cournot duopolist announced that it will double its output,

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

-The above figure shows the payoff to two firms,A and B,of releasing two versions of a new product.What is Firm A's best response if Firm B decides to release the high price version?

A trigger strategy

A private auction is an auction in which

What is the primary difference between a mixed strategy and a pure strategy?

-The above figure shows a payoff matrix for two firms,A and B,that must choose between a high-price strategy and a low-price strategy.For firm B,

In the 1980s,the USA and the USSR negotiated a reduction in nuclear arms; this is an example of a

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 14: Game Theory

One interesting feature of a prisoner's dilemma game is that

A player can choose among three strategies: L,C,and R.Strategy C is never a best response to the other player strategies.This means 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

-The above figure shows the payoff for two firms,A and B,that must each choose to sell either at a high or low price.Determine the dominant strategies for each firm (if any)and the Nash equilibria (if any).

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,how many pure Nash equilibria are there?

Before entering,fixed cost associated with the industry in question are sunk costs for

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,which one of the following statements is TRUE?

Which of the following constitutes a mixed strategy Nash equilibrium of the Odds and Evens game?

The individual with the highest valuation of the good will win in which of the following auctions?

If neither firm has a dominant strategy,a Nash equilibrium cannot exist.

A sub-game perfect Nash equilibrium is defined as

If a Cournot duopolist announced that it will double its output,

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

-The above figure shows the payoff to two firms,A and B,of releasing two versions of a new product.What is Firm A's best response if Firm B decides to release the high price version?

A trigger strategy

A private auction is an auction in which

What is the primary difference between a mixed strategy and a pure strategy?

-The above figure shows a payoff matrix for two firms,A and B,that must choose between a high-price strategy and a low-price strategy.For firm B,

In the 1980s,the USA and the USSR negotiated a reduction in nuclear arms; this is an example of a

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters