Question 1

If a strategy is a best response,then

Accepted Answer

A)  it will never be played. 
B)  it will never be part of a Nash equilibrium. 
C)  A and B are correct. 
D)  it could be part of a Nash equilibrium. 
A)  it will never be played. 
B)  it will never be part of a Nash equilibrium. 
C)  A and B are correct. 
D)  it could be part of a Nash equilibrium.

Question 2

A mixed strategy may

Accepted Answer

A)  be part of a Nash equilibrium. 
B)  be a set of probabilities of selecting each possible action. 
C)  lead identical firms to choose different actions. 
D)  All of the above. 
A)  be part of a Nash equilibrium. 
B)  be a set of probabilities of selecting each possible action. 
C)  lead identical firms to choose different actions. 
D)  All of the above.

Question 3

How can a firm be made better off by limiting its options?

Accepted Answer

By limiting its options,the firm commits

Question 4

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,and the government imposes a $20 per firm tax on firms that service this route,which of the following maximizes the firms' joint profits?

Accepted Answer

A)  Neither firm services the route. 
B)  Firm A offers firm B $20 to not enter. 
C)  Both firms will service this route. 
D)  Firm B offers firm A $30 to not enter. 
A)  Neither firm services the route. 
B)  Firm A offers firm B $20 to not enter. 
C)  Both firms will service this route. 
D)  Firm B offers firm A $30 to not enter.

Question 5

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant.The potential entrant cannot earn a profit if the incumbent

Accepted Answer

A)  chooses the Cournot level of output. 
B)  chooses the Stackelberg leader level of output. 
C)  shuts down. 
D)  deters entry. 
A)  chooses the Cournot level of output. 
B)  chooses the Stackelberg leader level of output. 
C)  shuts down. 
D)  deters entry.

Question 6

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 7

-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)  Firm A has a dominant strategy. 
B)  Firm B has a dominant strategy. 
C)  Neither firm entering is a Nash equilibrium. 
D)  The outcome of the game is unpredictable. 
A)  Firm A has a dominant strategy. 
B)  Firm B has a dominant strategy. 
C)  Neither firm entering is a Nash equilibrium. 
D)  The outcome of the game is unpredictable.

Question 8

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.

Question 9

-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.Both firms setting a high price is not a Nash equilibrium because

Accepted Answer

A)  setting a high price is the dominant strategy for each firm. 
B)  neither firm can improve its payoff by setting a low price given that the other firm is setting a high price. 
C)  there is no dominant strategy for either firm. 
D)  both firms can improve their payoff by setting a low price given that the other firm is setting a high price. 
A)  setting a high price is the dominant strategy for each firm. 
B)  neither firm can improve its payoff by setting a low price given that the other firm is setting a high price. 
C)  there is no dominant strategy for either firm. 
D)  both firms can improve their payoff by setting a low price given that the other firm is setting a high price.

Question 10

A surprising outcome of the Rock-Paper-Scissors game is that

Accepted Answer

A)  it is a clear example of a first mover advantage. 
B)  there is no pure-strategy Nash equilibrium. 
C)  it is best not to play the game. 
D)  it is a good way to determine who goes first in a sequential move game. 
A)  it is a clear example of a first mover advantage. 
B)  there is no pure-strategy Nash equilibrium. 
C)  it is best not to play the game. 
D)  it is a good way to determine who goes first in a sequential move game.

Question 11

-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 12

One way to ensure cooperation in an infinitely repeated simultaneous game is

Accepted Answer

A)  to always play the dominant strategy. 
B)  to punish the player that reneges on agreements. 
C)  to never punish any player. 
D)  to always punish all players. 
A)  to always play the dominant strategy. 
B)  to punish the player that reneges on agreements. 
C)  to never punish any player. 
D)  to always punish all players.

Question 13

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 14

A Nash equilibrium occurs when

Accepted Answer

A)  players choose their best strategy given the strategies chosen by others. 
B)  the efficient allocation of resources is achieved by setting marginal revenue equal to marginal cost. 
C)  a monopolist is forced to produce the efficient level of output. 
D)  oligopolists cooperate with each other. 
A)  players choose their best strategy given the strategies chosen by others. 
B)  the efficient allocation of resources is achieved by setting marginal revenue equal to marginal cost. 
C)  a monopolist is forced to produce the efficient level of output. 
D)  oligopolists cooperate with each other.

Question 15

-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)  Firm A does not have a dominant strategy. 
B)  Firm B does not have a dominant strategy. 
C)  Neither firm entering is a Nash equilibrium. 
D)  The outcome of the game is unpredictable. 
A)  Firm A does not have a dominant strategy. 
B)  Firm B does not have a dominant strategy. 
C)  Neither firm entering is a Nash equilibrium. 
D)  The outcome of the game is unpredictable.

Question 16

Assume an industry,currently dominated by one firm,experiences a large decline in fixed costs.This will

Accepted Answer

A)  make entry of other firms more likely. 
B)  make entry of other firms less likely. 
C)  serve as higher barrier to entry. 
D)  induce the incumbent firm to exit the industry. 
A)  make entry of other firms more likely. 
B)  make entry of other firms less likely. 
C)  serve as higher barrier to entry. 
D)  induce the incumbent firm to exit the industry.

Question 17

When neither player has a dominant strategy,

Accepted Answer

A)  game theory will not provide information. 
B)  no Nash-Equilibrium exists. 
C)  at least one Nash-Equilibrium exists. 
D)  the game cannot be analyzed. 
A)  game theory will not provide information. 
B)  no Nash-Equilibrium exists. 
C)  at least one Nash-Equilibrium exists. 
D)  the game cannot be analyzed.

Question 18

Which auctioned good is more likely to have different private values across potential bidders?

Accepted Answer

A)  a truckload of sand 
B)  a Monet painting 
C)  a brand new car 
D)  a gold bar 
A)  a truckload of sand 
B)  a Monet painting 
C)  a brand new car 
D)  a gold bar

Question 19

A subgame perfect Nash equilibrium

Accepted Answer

A)  can be solved by backward induction. 
B)  is a set of strategies that are a Nash equilibrium in every subgame. 
C)  is a stronger form of Nash equilibrium. 
D)  All of the above are correct. 
A)  can be solved by backward induction. 
B)  is a set of strategies that are a Nash equilibrium in every subgame. 
C)  is a stronger form of Nash equilibrium. 
D)  All of the above are correct.

Question 20

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.

If a strategy is a best response,then

A mixed strategy may

How can a firm be made better off by limiting its options?

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,and the government imposes a $20 per firm tax on firms that service this route,which of the following maximizes the firms' joint profits?

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant.The potential entrant cannot earn a profit if the incumbent

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

-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?

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

-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.Both firms setting a high price is not a Nash equilibrium because

A surprising outcome of the Rock-Paper-Scissors game is that

-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?

One way to ensure cooperation in an infinitely repeated simultaneous game is

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

A Nash equilibrium occurs when

-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?

Assume an industry,currently dominated by one firm,experiences a large decline in fixed costs.This will

When neither player has a dominant strategy,

Which auctioned good is more likely to have different private values across potential bidders?

A subgame perfect Nash equilibrium

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

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

If a strategy is a best response,then

A mixed strategy may

How can a firm be made better off by limiting its options?

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,and the government imposes a $20 per firm tax on firms that service this route,which of the following maximizes the firms' joint profits?

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant.The potential entrant cannot earn a profit if the incumbent

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

-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?

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

-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.Both firms setting a high price is not a Nash equilibrium because

A surprising outcome of the Rock-Paper-Scissors game is that

-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?

One way to ensure cooperation in an infinitely repeated simultaneous game is

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

A Nash equilibrium occurs when

-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?

Assume an industry,currently dominated by one firm,experiences a large decline in fixed costs.This will

When neither player has a dominant strategy,

Which auctioned good is more likely to have different private values across potential bidders?

A subgame perfect Nash equilibrium

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

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