Deck 9: Games and Strategic Behavior

Question 1

A payoff matrix is used to show:

A) the payoff to being a monopolist relative to a competitive firm.
B) the demand curve faced by two competing firms.
C) each player's payoffs in each possible combination of strategies.
D) the sequence of strategies played in a game over time.

Answer 1

C
Explanation: Payoff matrices illustrate the outcomes of all possible strategy combinations.

Question 2

In the Nash Equilibrium of a prisoner's dilemma game:

A) there is no cash left on the table.
B) there is unrealized opportunity for both to gain.
C) total economic surplus is maximized.
D) both players have equal payoffs.

Answer 2

B
Explanation: In the Nash Equilibrium of a prisoner's dilemma game,if both players play their dominant strategies each earns less than had each played their dominated strategies.

Question 3

A dominant strategy occurs when:

A) one player has a strategy that yields the highest payoff regardless of the other player's choice.
B) both players have a strategy that yields the highest payoff independent of the other's choice.
C) both players make the same choice.
D) the payoff is the maximum possible combination of payoffs in the game.

Answer 3

A
Explanation: A dominant strategy is one that yields a higher payoff no matter what the other players choose.

Question 4

Joe is the owner of the 7-11 Mini Mart,Sam is the owner of the SuperAmerica Mini Mart and together they are the only gas stations in town.At the current price of $3 per gallon,both receive total revenues of $1,000.Joe is considering cutting his price to $2.90,which would increase his total revenue to $1,350 if Sam continues to charge $3.If Sam's price remains $3 after Joe cuts his price,Sam will collect $500 in revenues.If Sam cuts his price to $2.90,his total revenues would also rise to $1,350 if Joe continues to charge $3.Joe will collect $500 in revenues if he keeps his price at $3 while Sam lowers his to $2.90.Joe and Sam will receive $900 each in total revenue if they both lower their price to $2.90.You may find it easier to answer the following question if you fill in the payoff matrix below. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\text { Joe }\\\text { Sam }\begin{array}{|l|c|c|}\hline &\begin{array}{c}\text { Cut } \\\text { Price }\end{array} & \begin{array}{c}\text { Keep Old } \\\text { Price }\end{array} \\\hline \text { Cut } \\\text { Price } \\\hline \text { Keep Old } \\\text { Price } \\\hline\end{array}\end{array}$
Refer to the information given above.If both players choose their dominated strategy they will each earn _____ and if both players choose their dominant strategy they will each earn _____.

A) $500;$1350
B) $900;$1350
C) $900;$1000
D) $1000;$900

Question 5

The table below shows the payoff matrix in the form of short term profits for two firms,A and B,for two different strategies,investing in new capital or not investing in new capital.Payoffs are in millions of dollars. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Firm B }\\\text { Firm A }\begin{array}{|l|l|l|}\hline & \text { Invest } & \text { Not Invest } \\\hline {\text { Invest }} & \$ 20 \text { for } \mathrm{A} & \$ 70 \text { for } \mathrm{A} \\& \$ 20 \text { for } \mathrm{B} & \$ 5 \text { for } \mathrm{B} \\\hline {\text { Not Invest }} & \$ 5 \text { for } \mathrm{A} & \$ 50 \text { for } \mathrm{A} \\& \$ 70 \text { for } \mathrm{B} & \$ 50 \text { for B } \\\hline\end{array}\end{array}$
Refer to the figure above.For Firm A,_____ is its dominant strategy,and for Firm B,______ is its dominant strategy.

A) investing;not investing
B) not investing;investing
C) investing;investing
D) not investing;not investing

Question 6

Joe is the owner of the 7-11 Mini Mart,Sam is the owner of the SuperAmerica Mini Mart and together they are the only gas stations in town.At the current price of $3 per gallon,both receive total revenues of $1,000.Joe is considering cutting his price to $2.90,which would increase his total revenue to $1,350 if Sam continues to charge $3.If Sam's price remains $3 after Joe cuts his price,Sam will collect $500 in revenues.If Sam cuts his price to $2.90,his total revenues would also rise to $1,350 if Joe continues to charge $3.Joe will collect $500 in revenues if he keeps his price at $3 while Sam lowers his to $2.90.Joe and Sam will receive $900 each in total revenue if they both lower their price to $2.90.You may find it easier to answer the following question if you fill in the payoff matrix below. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\text { Joe }\\\text { Sam }\begin{array}{|l|c|c|}\hline &\begin{array}{c}\text { Cut } \\\text { Price }\end{array} & \begin{array}{c}\text { Keep Old } \\\text { Price }\end{array} \\\hline \text { Cut } \\\text { Price } \\\hline \text { Keep Old } \\\text { Price } \\\hline\end{array}\end{array}$
Refer to the information given above.In this situation the Nash Equilibrium yields a:

A) lower payoff than each would receive if each played his dominant strategy.
B) higher payoff than each would receive if each played his dominant strategy.
C) lower payoff than each would receive if each played his dominated strategy.
D) the same payoff that each would receive if each played his dominated strategy.

Question 7

Joe is the owner of the 7-11 Mini Mart,Sam is the owner of the SuperAmerica Mini Mart and together they are the only gas stations in town.At the current price of $3 per gallon,both receive total revenues of $1,000.Joe is considering cutting his price to $2.90,which would increase his total revenue to $1,350 if Sam continues to charge $3.If Sam's price remains $3 after Joe cuts his price,Sam will collect $500 in revenues.If Sam cuts his price to $2.90,his total revenues would also rise to $1,350 if Joe continues to charge $3.Joe will collect $500 in revenues if he keeps his price at $3 while Sam lowers his to $2.90.Joe and Sam will receive $900 each in total revenue if they both lower their price to $2.90.You may find it easier to answer the following question if you fill in the payoff matrix below. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\text { Joe }\\\text { Sam }\begin{array}{|l|c|c|}\hline &\begin{array}{c}\text { Cut } \\\text { Price }\end{array} & \begin{array}{c}\text { Keep Old } \\\text { Price }\end{array} \\\hline \text { Cut } \\\text { Price } \\\hline \text { Keep Old } \\\text { Price } \\\hline\end{array}\end{array}$
Refer to the information given above.To Sam,cutting his price to $2.90 is a:

A) revenue maximizing strategy.
B) dominant strategy.
C) dominated strategy.
D) profit maximizing strategy.

Question 8

For a game involving two players with two possible strategies,which of the following is a requirement for a prisoner's dilemma?

A) Neither player has a dominant strategy.
B) The payoff for each player if both play the dominated strategies must be more than the payoff for each player if both play dominant strategies.
C) The payoff if both play the dominant strategies must be more than the payoff if both play their dominated strategies.
D) There is no Nash equilibrium.

Question 9

Joe is the owner of the 7-11 Mini Mart,Sam is the owner of the SuperAmerica Mini Mart and together they are the only gas stations in town.At the current price of $3 per gallon,both receive total revenues of $1,000.Joe is considering cutting his price to $2.90,which would increase his total revenue to $1,350 if Sam continues to charge $3.If Sam's price remains $3 after Joe cuts his price,Sam will collect $500 in revenues.If Sam cuts his price to $2.90,his total revenues would also rise to $1,350 if Joe continues to charge $3.Joe will collect $500 in revenues if he keeps his price at $3 while Sam lowers his to $2.90.Joe and Sam will receive $900 each in total revenue if they both lower their price to $2.90.You may find it easier to answer the following question if you fill in the payoff matrix below. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\text { Joe }\\\text { Sam }\begin{array}{|l|c|c|}\hline &\begin{array}{c}\text { Cut } \\\text { Price }\end{array} & \begin{array}{c}\text { Keep Old } \\\text { Price }\end{array} \\\hline \text { Cut } \\\text { Price } \\\hline \text { Keep Old } \\\text { Price } \\\hline\end{array}\end{array}$
Refer to the information given above.The clear outcome of this game is that:

A) Joe will cut his price and Sam won't.
B) both will cut price to $2.90.
C) Sam will cut his price and Joe won't.
D) neither Joe nor Sam will cut his price.

Question 10

The equilibrium in a prisoner's dilemma is an example of:

A) the low-hanging fruit principle.
B) the comparative advantage principle.
C) the equilibrium principle.
D) the smart for one,dumb for all principle.

Question 11

Game theory is not useful in understanding perfect competition because:

A) by assumption,the firms are so small as to be unable to influence price and thus are not interdependent.
B) perfectly competitive firms are honest.
C) the players can't be identified.
D) the payoffs to their choices are unknown.

Question 12

Joe is the owner of the 7-11 Mini Mart,Sam is the owner of the SuperAmerica Mini Mart and together they are the only gas stations in town.At the current price of $3 per gallon,both receive total revenues of $1,000.Joe is considering cutting his price to $2.90,which would increase his total revenue to $1,350 if Sam continues to charge $3.If Sam's price remains $3 after Joe cuts his price,Sam will collect $500 in revenues.If Sam cuts his price to $2.90,his total revenues would also rise to $1,350 if Joe continues to charge $3.Joe will collect $500 in revenues if he keeps his price at $3 while Sam lowers his to $2.90.Joe and Sam will receive $900 each in total revenue if they both lower their price to $2.90.You may find it easier to answer the following question if you fill in the payoff matrix below. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\text { Joe }\\\text { Sam }\begin{array}{|l|c|c|}\hline &\begin{array}{c}\text { Cut } \\\text { Price }\end{array} & \begin{array}{c}\text { Keep Old } \\\text { Price }\end{array} \\\hline \text { Cut } \\\text { Price } \\\hline \text { Keep Old } \\\text { Price } \\\hline\end{array}\end{array}$
Refer to the information given above.To both Joe and Sam,__________ is a __________.

A) cutting price to $2.90;disequilibrium
B) leaving price at $3;Nash equilibrium
C) leaving price at $3;dominant strategy
D) cutting price to $2.90;dominant strategy

Question 13

Game theory provides tools that are used to model:

A) how perfectly competitive firms behave.
B) cost functions faced by firms.
C) consumer demand.
D) interdependence.

Question 14

A dilemma in the Prisoner's Dilemma comes from the fact that:

A) the outcome is purely random.
B) no strategy is dominant.
C) if both players play the dominant strategy they each earn a smaller payoff than had they played the dominated strategy.
D) it was originally devised to explain the behavior of prisoners.

Question 15

The table below shows the payoff matrix in the form of short term profits for two firms,A and B,for two different strategies,investing in new capital or not investing in new capital.Payoffs are in millions of dollars. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Firm B }\\\text { Firm A }\begin{array}{|l|l|l|}\hline & \text { Invest } & \text { Not Invest } \\\hline {\text { Invest }} & \$ 20 \text { for } \mathrm{A} & \$ 70 \text { for } \mathrm{A} \\& \$ 20 \text { for } \mathrm{B} & \$ 5 \text { for } \mathrm{B} \\\hline {\text { Not Invest }} & \$ 5 \text { for } \mathrm{A} & \$ 50 \text { for } \mathrm{A} \\& \$ 70 \text { for } \mathrm{B} & \$ 50 \text { for B } \\\hline\end{array}\end{array}$
Refer to the figure above.An industrial spy comes to firm B and claims to know what firm A has decided.How much would this information be worth to firm B?

A) $0.
B) $50 million.
C) $30 million.
D) $70 million.

Question 16

The prisoner's dilemma refers to games in which:

A) neither player has a dominant strategy.
B) one player has a dominant strategy and the other does not.
C) both players have a dominant strategy which results in a lower payoff than they would earn if they play their dominated strategies.
D) both players have a dominant strategy which results in the largest possible payoff.

Question 17

The reason that the prisoner's dilemma presents a dilemma is that:

A) neither player has a comparative advantage,so neither can infer what the other player will choose.
B) the market cannot be in equilibrium because the players do not have dominant strategies.
C) each player has an incentive to play his or her dominant strategy,but when both choose the dominant strategy each player has a lower payoff than he or she would have had if they each had chosen the dominated strategy.
D) each player has an incentive to play his or her dominated strategy,but when both choose the dominated strategy each player has a lower payoff than he or she would have had if they each had chosen the dominant strategy.

Question 18

The three elements of a game are:

A) the firm,the consumers,and the profit.
B) the players,the strategies,and the payoffs.
C) the model,the graph,and the costs.
D) the costs,the revenue,and the profit.

Question 19

Joe is the owner of the 7-11 Mini Mart,Sam is the owner of the SuperAmerica Mini Mart and together they are the only gas stations in town.At the current price of $3 per gallon,both receive total revenues of $1,000.Joe is considering cutting his price to $2.90,which would increase his total revenue to $1,350 if Sam continues to charge $3.If Sam's price remains $3 after Joe cuts his price,Sam will collect $500 in revenues.If Sam cuts his price to $2.90,his total revenues would also rise to $1,350 if Joe continues to charge $3.Joe will collect $500 in revenues if he keeps his price at $3 while Sam lowers his to $2.90.Joe and Sam will receive $900 each in total revenue if they both lower their price to $2.90.You may find it easier to answer the following question if you fill in the payoff matrix below. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\text { Joe }\\\text { Sam }\begin{array}{|l|c|c|}\hline &\begin{array}{c}\text { Cut } \\\text { Price }\end{array} & \begin{array}{c}\text { Keep Old } \\\text { Price }\end{array} \\\hline \text { Cut } \\\text { Price } \\\hline \text { Keep Old } \\\text { Price } \\\hline\end{array}\end{array}$
Refer to the information given above.To Joe,leaving his price at $3 is a:

A) revenue maximizing strategy.
B) dominant strategy.
C) dominated strategy.
D) profit maximization strategy.

Question 20

The table below shows the payoff matrix in the form of short term profits for two firms,A and B,for two different strategies,investing in new capital or not investing in new capital.Payoffs are in millions of dollars. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Firm B }\\\text { Firm A }\begin{array}{|l|l|l|}\hline & \text { Invest } & \text { Not Invest } \\\hline {\text { Invest }} & \$ 20 \text { for } \mathrm{A} & \$ 70 \text { for } \mathrm{A} \\& \$ 20 \text { for } \mathrm{B} & \$ 5 \text { for } \mathrm{B} \\\hline {\text { Not Invest }} & \$ 5 \text { for } \mathrm{A} & \$ 50 \text { for } \mathrm{A} \\& \$ 70 \text { for } \mathrm{B} & \$ 50 \text { for B } \\\hline\end{array}\end{array}$
Refer to the figure above.The game is an example of a:

A) cartel.
B) credible promise.
C) prisoner's dilemma.
D) multiple equilibria game.

Question 21

Most cartels end or cease to be effective because:

A) of enforcement of antitrust legislation.
B) of the incentive to cheat on the cartel agreement.
C) the dominant member firm buys out the other firms.
D) consumers discover the cartel agreement and buy instead from other firms.

Question 22

Suppose Acme and Mega produce and sell identical product with zero marginal and average cost.Following is the market demand and marginal revenue curves for the product.
Refer to the figure above.If Acme and Mega decide to collude and work as a pure monopolist such that each firm will produce half the quantity demanded by the market,what will be the economic profit for Mega?

A) $0
B) $50
C) $100
D) $150

Question 23

OPEC is an example of a:

A) monopsony.
B) cartel.
C) monopoly.
D) duopoly.

Question 24

The table below shows the payoff matrix in the form of short term profits for two firms,A and B,for two different strategies,investing in new capital or not investing in new capital.Payoffs are in millions of dollars. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Firm B }\\\text { Firm A }\begin{array}{|l|l|l|}\hline & \text { Invest } & \text { Not Invest } \\\hline {\text { Invest }} & \$ 20 \text { for } \mathrm{A} & \$ 70 \text { for } \mathrm{A} \\& \$ 20 \text { for } \mathrm{B} & \$ 5 \text { for } \mathrm{B} \\\hline {\text { Not Invest }} & \$ 5 \text { for } \mathrm{A} & \$ 50 \text { for } \mathrm{A} \\& \$ 70 \text { for } \mathrm{B} & \$ 50 \text { for B } \\\hline\end{array}\end{array}$
Refer to the figure above.An industrial spy comes to firm B and offers to pay B in exchange for B's certain and enforceable promise to not invest.How much must the spy pay B?

A) $0.
B) At least $15 million.
C) At least $35 million.
D) At least $50 million.

Question 25

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost.Below is the market demand and marginal revenue curves for the product.
Refer to the figure above.The profit-maximizing quantity for a monopolist with this demand curve is _____ units,which the monopolist would sell for ______.

A) 3,000;$1.00
B) 1,000;$1.50
C) 2,000;$1.50
D) 1,000;$2.50

Question 26

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost.Below is the market demand and marginal revenue curves for the product.
Refer to the figure above.Quick Buck and Pushy Sales have agreed to each produce half the profit-maximizing monopolist quantity,set the monopoly price and split the profits evenly.Suppose Quick Buck cheats on Pushy Sales and reduces its price to $1.00 each while Pushy Sales continues to comply with the collusive agreement.What will be the economic profit for Quick Buck?

A) $6,000
B) $1,500
C) $2,000
D) $3,000

Question 27

Suppose Acme and Mega produce and sell identical product with zero marginal and average cost.Following is the market demand and marginal revenue curves for the product.
Refer to the figure above.The profit-maximizing quantity and price for a monopolist with this demand curve are _____.

A) 50 units and $2
B) 100 units and $2
C) 50 units and $3
D) 100 units and $1

Question 28

Suppose Acme and Mega produce and sell identical product with zero marginal and average cost.Following is the market demand and marginal revenue curves for the product.
Refer to the figure above.Suppose Mega and Acme have colluded to work as a pure monopolist,but Mega cheats on Acme and reduces its price to $1.00 each.How much profit will Mega earn?

A) $75
B) $100
C) $150
D) $200

Question 29

The numbers in each cell are each firm's profits. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Column Cafe }\\\text { Row Restaurant }\begin{array}{|l|l|l|}\hline & \begin{array}{l}\text { Publish Coupons in } \\\text { Student Paper }\end{array} & \text { No Coupons } \\\hline \text { Publish Coupons in } & \text { Row: 25, } & \text { Row: 200, } \\\text { Student Paper } & \text { Column: 25 } & \text { Column: 10 } \\\hline \text { No Coupons } & \text { Row: 10, } & \text { Row: 120, } \\& \text { Column: 200 } & \text { Column: 120 } \\\hline\end{array}\end{array}$
Refer to the figure above.If Row Restaurant decides to publish coupons,Column Cafe would make the most profit if it:

A) did not offer coupons.
B) also offered coupons.
C) it doesn't matter which strategy is chosen because Column Cafe will have the same payoff in either case.
D) offered coupons half of the time and did not offer coupons the rest of the time.

Question 30

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost.Below is the market demand and marginal revenue curves for the product.
Refer to the figure above.Quick Buck and Pushy Sales have agreed to each produce half the profit-maximizing monopolist quantity,set the monopoly price and split the profits evenly.Suppose Quick Buck cheats on Pushy Sales and reduces its price to $1.00 and Pushy Sales matches the price cut.Consumers are evenly split between the two firms.What will be the economic profit for Quick Buck?

A) $1,000
B) $1,500
C) $2,000
D) $3,000

Question 31

An agreement among firms to restrict production with the goal of earning economic profits is a:

A) pure monopoly.
B) oligopoly.
C) cartel.
D) duopoly.

Question 32

Suppose market demand for bottled water in the U.S.is low enough that one firm could supply all of the demand.Two firms enter the market and agree to charge a price above the marginal cost of production.We can expect that:

A) they will make a considerably large profit.
B) they will work better than a cartel.
C) this agreement will collapse.
D) if one firm does not honor the agreement the other firm will sue for breach of contract.

Question 33

Suppose Acme and Mega produce and sell identical product with zero marginal and average cost.Following is the market demand and marginal revenue curves for the product.
Refer to the figure above.Suppose Mega and Acme have colluded to work as a pure monopolist,but Mega cheats on Acme and reduces its price to $1.00 each.If Acme matches the price cut and customers are evenly split between the two firms,what will Acme's economic profit be?

A) $75
B) $100
C) $150
D) $200

Question 34

Suppose Acme and Mega produce and sell identical product with zero marginal and average cost.Following is the market demand and marginal revenue curves for the product.
Refer to the figure above.Suppose Mega and Acme have colluded to work as a pure monopolist,but Mega cheats on Acme and reduces its price to $1.00 each.Mega would then sell ____ units and Acme would sell _____ units.

A) 150;50
B) 100;50
C) 150;0
D) 100;0

Question 35

Cartels would be more stable if:

A) firms that cheat on the agreement could be legally punished.
B) firms that cheat on the agreement were better informed about the value of agreement.
C) demand for the output was more variable.
D) the cartel profit were higher than the profit each individual firm could earn without the cartel.

Question 36

The table below shows the payoff matrix in the form of short term profits for two firms,A and B,for two different strategies,investing in new capital or not investing in new capital.Payoffs are in millions of dollars. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Firm B }\\\text { Firm A }\begin{array}{|l|l|l|}\hline & \text { Invest } & \text { Not Invest } \\\hline {\text { Invest }} & \$ 20 \text { for } \mathrm{A} & \$ 70 \text { for } \mathrm{A} \\& \$ 20 \text { for } \mathrm{B} & \$ 5 \text { for } \mathrm{B} \\\hline {\text { Not Invest }} & \$ 5 \text { for } \mathrm{A} & \$ 50 \text { for } \mathrm{A} \\& \$ 70 \text { for } \mathrm{B} & \$ 50 \text { for B } \\\hline\end{array}\end{array}$
Refer to the figure above.An industrial spy from firm A comes to firm B and offers to pay B in exchange for B's certain and enforceable promise to not invest.What is the most that firm A will be willing to pay B to not invest?

A) $0.
B) $20 million.
C) $35 million.
D) $50 million.

Question 37

The numbers in each cell are each firm's profits. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Column Cafe }\\\text { Row Restaurant }\begin{array}{|l|l|l|}\hline & \begin{array}{l}\text { Publish Coupons in } \\\text { Student Paper }\end{array} & \text { No Coupons } \\\hline \text { Publish Coupons in } & \text { Row: 25, } & \text { Row: 200, } \\\text { Student Paper } & \text { Column: 25 } & \text { Column: 10 } \\\hline \text { No Coupons } & \text { Row: 10, } & \text { Row: 120, } \\& \text { Column: 200 } & \text { Column: 120 } \\\hline\end{array}\end{array}$
Refer to the figure above.If Column Cafe offers coupons,and Row Restaurants does not publish coupons:

A) Row Restaurant will earn 10 in profits,and Column Cafe will earn 200 in profits.
B) both Row Restaurant and Column Cafe will earn 25 in profits.
C) Row Restaurant will earn profits of 200 and Column Cafe will earn profits of 10.
D) both Row Restaurant and Column Cafe will earn profits of 120.

Question 38

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost.Below is the market demand and marginal revenue curves for the product.
Refer to the figure above.Quick Buck and Pushy Sales have agreed to each produce half the profit-maximizing monopolist quantity,set the monopoly price and split the profits evenly.Suppose Quick Buck cheats on Pushy Sales and reduces its price to $1.00 each while Pushy Sales continues to comply with the collusive agreement.Quick Buck would then sell _____ units and Pushy Sales would sell ______ units.

A) 0;3,000
B) 1,500;1,500
C) 2,000;1,000
D) 3,000;0

Question 39

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost.Below is the market demand and marginal revenue curves for the product.
Refer to the figure above.If Quick Buck and Pushy Sales decide to collude and work as a pure monopolist so that each firm will produce half the quantity demanded by the market,what will be the economic profit for Quick Buck?

A) $1,000
B) $1,500
C) $2,000
D) $3,000

Question 40

The numbers in each cell are each firm's profits. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Column Cafe }\\\text { Row Restaurant }\begin{array}{|l|l|l|}\hline & \begin{array}{l}\text { Publish Coupons in } \\\text { Student Paper }\end{array} & \text { No Coupons } \\\hline \text { Publish Coupons in } & \text { Row: 25, } & \text { Row: 200, } \\\text { Student Paper } & \text { Column: 25 } & \text { Column: 10 } \\\hline \text { No Coupons } & \text { Row: 10, } & \text { Row: 120, } \\& \text { Column: 200 } & \text { Column: 120 } \\\hline\end{array}\end{array}$
Refer to the figure above.The payoffs of this game are such that:

A) if Row Restaurant expects that Column Cafe will choose its dominant strategy,Row should choose to not follow its own dominant strategy.
B) profits at both firms would be highest if both firms follow their dominant strategies.
C) both firms would benefit from a law that made publishing coupons illegal.
D) an agreement to not publish coupons would be stable because with these profits neither firm has an incentive to defect.

Question 41

The table below shows the payoffs to the running of negative and positive political ads by two candidates.The payoffs are the percentage increase or decrease in the number of voters willing to vote for the candidate as a result of the campaign styles. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Republican Candidate }\\\text { Democratic Candidate }\begin{array}{|l|l|l|}\hline & \text { Positive Campaign } & \text { Negative Campaign } \\\hline {\text { Positive Campaign }} & \begin{array}{l}\text { Democrat } 0 \% \\\text { Republican: } 0 \%\end{array} & \begin{array}{l}\text { Democrat:-3\% } \\\text { Republican: }+3 \%\end{array} \\\hline {\text { Negative Campaign }} & \begin{array}{l}\text { Democrat: }+5 \% \\\text { Republican: }-5 \%\end{array} & \begin{array}{l}\text { Democrat }-2 \% \\\text { Republican: }-2 \%\end{array} \\\hline\end{array}\end{array}$
Refer to the figure above.Suppose that the Republican candidate tells the Democratic candidate that he intends to run a positive campaign.The likely result is that:

A) both candidates will run a positive campaign.
B) the Republican candidate will run a positive campaign,but the Democratic candidate will run a negative campaign.
C) the Republican candidate will eventually turn to negative campaigning because the Democratic candidate will run a negative campaign.
D) the Democratic candidate will trust the Republican candidate's statement and run a positive campaign,but the Republican candidate will run a negative campaign.

Question 42

The table below shows the payoffs to the running of negative and positive political ads by two candidates.The payoffs are the percentage increase or decrease in the number of voters willing to vote for the candidate as a result of the campaign styles. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Republican Candidate }\\\text { Democratic Candidate }\begin{array}{|l|l|l|}\hline & \text { Positive Campaign } & \text { Negative Campaign } \\\hline {\text { Positive Campaign }} & \begin{array}{l}\text { Democrat } 0 \% \\\text { Republican: } 0 \%\end{array} & \begin{array}{l}\text { Democrat:-3\% } \\\text { Republican: }+3 \%\end{array} \\\hline {\text { Negative Campaign }} & \begin{array}{l}\text { Democrat: }+5 \% \\\text { Republican: }-5 \%\end{array} & \begin{array}{l}\text { Democrat }-2 \% \\\text { Republican: }-2 \%\end{array} \\\hline\end{array}\end{array}$
Refer to the figure above.Given the payoff matrix,running a negative campaign is __________ for __________.

A) a dominated strategy;the Democratic candidate
B) a dominated strategy;the Republican candidate
C) a dominant strategy;the Democratic candidate
D) neither a dominant nor dominated strategy;the Republican candidate

Question 43

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU).The owners of the two firms decide to fix the price of bagels.The table shows the total profits the firms will earn if they abide by the price setting agreement or if they cheat on the agreement. $\begin{array}{c}\text { Bagel World }\\\text { Bagels'R'Us }\begin{array}{|l|l|l|}\hline & \text { Cheat } & \text { Abide } \\\hline \text { Cheat } & \text { BRU: } \$ 40 ; \text { BW: } \$ 40 & \text { BRU: } \$ 80 ; \text { BW: } \$ 0 \\\hline \text { Abide } & \text { BRU: } \$ 0 ; \text { BW: } \$ 80 & \text { BRU: } \$ 45 ; \text { BW: } \$ 45 \\\hline\end{array}\end{array}$
Refer to the figure above.This game has __________ with __________.

A) a Nash equilibrium;both firms abiding by the agreement
B) no equilibrium;no prediction about which strategy will be chosen
C) a Nash equilibrium;both firms cheating
D) a Nash equilibrium;Bagel World cheating and Bagels 'R' Us abiding

Question 44

A credible threat is an action that is:

A) possible to carry out.
B) legally enforceable.
C) in the threatener's self interest to carry out.
D) not in the threatener's self interest to carry out.

Question 45

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU).The owners of the two firms decide to fix the price of bagels.The table shows the total profits the firms will earn if they abide by the price setting agreement or if they cheat on the agreement.
Refer to the figure above.For Bagel World,__________ is its __________.

A) abiding by the agreement;dominant strategy
B) cheating on the agreement;dominated strategy
C) cheating on the agreement;dominant strategy
D) abiding by the agreement;dominant strategy when Bagels'R'Us also abides

Question 46

A credible promise is an action that is:

A) in the promiser's self interest to keep.
B) legally enforceable.
C) made by an honest person.
D) possible to keep.

Question 47

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU).The owners of the two firms decide to fix the price of bagels.The table shows the total profits the firms will earn if they abide by the price setting agreement or if they cheat on the agreement. $\begin{array}{c}\text { Bagel World }\\\text { Bagels'R'Us }\begin{array}{|l|l|l|}\hline & \text { Cheat } & \text { Abide } \\\hline \text { Cheat } & \text { BRU: } \$ 40 ; \text { BW: } \$ 40 & \text { BRU: } \$ 80 ; \text { BW: } \$ 0 \\\hline \text { Abide } & \text { BRU: } \$ 0 ; \text { BW: } \$ 80 & \text { BRU: } \$ 45 ; \text { BW: } \$ 45 \\\hline\end{array}\end{array}$
Refer to the figure above.For Bagels 'R' Us,__________ is its __________.

A) abiding by the agreement;dominant strategy
B) cheating on the agreement;dominated strategy
C) cheating on the agreement;dominant strategy
D) abiding by the agreement;dominant strategy when Bagel World also abides

Question 48

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU).The owners of the two firms decide to fix the price of bagels.The table shows the total profits the firms will earn if they abide by the price setting agreement or if they cheat on the agreement. $\begin{array}{c}\text { Bagel World }\\\text { Bagels'R'Us }\begin{array}{|l|l|l|}\hline & \text { Cheat } & \text { Abide } \\\hline \text { Cheat } & \text { BRU: } \$ 40 ; \text { BW: } \$ 40 & \text { BRU: } \$ 80 ; \text { BW: } \$ 0 \\\hline \text { Abide } & \text { BRU: } \$ 0 ; \text { BW: } \$ 80 & \text { BRU: } \$ 45 ; \text { BW: } \$ 45 \\\hline\end{array}\end{array}$
Refer to the figure above.Suppose the firms agree to the following: if one firm cheats today,the other firm will cheat tomorrow,but if one firm abides today,the other will abide tomorrow.The likely effect of this agreement would be:

A) to increase the probability that both firms would cheat.
B) to increase the probability that Bagel World would cheat.
C) to increase the probability that both firms would abide.
D) to increase the probability that Bagels 'R' Us would cheat.

Question 49

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU).The owners of the two firms decide to fix the price of bagels.The table shows the total profits the firms will earn if they abide by the price setting agreement or if they cheat on the agreement. $\begin{array}{c}\text { Bagel World }\\\text { Bagels'R'Us }\begin{array}{|l|l|l|}\hline & \text { Cheat } & \text { Abide } \\\hline \text { Cheat } & \text { BRU: } \$ 40 ; \text { BW: } \$ 40 & \text { BRU: } \$ 80 ; \text { BW: } \$ 0 \\\hline \text { Abide } & \text { BRU: } \$ 0 ; \text { BW: } \$ 80 & \text { BRU: } \$ 45 ; \text { BW: } \$ 45 \\\hline\end{array}\end{array}$
Refer to the figure above.Suppose a new element was introduced into the agreement: if one firm cheats today,the other firm will cheat tomorrow,but if one firm abides today,the other will abide tomorrow.This strategy pattern is known as:

A) the prisoner's dilemma.
B) cartel-like behavior.
C) tit-for-tat.
D) mutual cooperation.

Question 50

A ____ describes all of the possible moves in a game in sequence and the payoffs to each possible combination of moves.

A) decision tree
B) payoff matrix
C) game graph
D) multi-period game

Question 51

According to the text,at a party everyone shouts in order to be heard.If instead everyone spoke at a normal volume people would still be heard.The likely reason that people continue to shout is that the:

A) individual incentive to be heard is smaller than group incentive for everyone to be heard.
B) individual incentive to be heard is greater than group incentive for everyone to be heard.
C) individuals will never do better by speaking more loudly.
D) prisoner's dilemma does not work in a party.

Question 52

In tit-for-tat,if your partner _______ on the first interaction you would then _______ in your next interaction with her.

A) defected;cooperate
B) defected;defect
C) cooperates;defect
D) defected;refuse to play

Question 53

In a repeated prisoner's dilemma players:

A) never learn to play their dominant strategies.
B) can sustain cooperation by employing the tit-for-tat strategy.
C) can increase the incidence of dominant strategy play by employing the tit-for-tat strategy.
D) always play their dominant strategy.

Question 54

The tit-for-tat strategy only works for prisoner's dilemma games that:

A) have only one Nash equilibrium.
B) are played only one time.
C) have no Nash equilibrium.
D) are repeated.

Question 55

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU).The owners of the two firms decide to fix the price of bagels.The table shows the total profits the firms will earn if they abide by the price setting agreement or if they cheat on the agreement. $\begin{array}{c}\text { Bagel World }\\\text { Bagels'R'Us }\begin{array}{|l|l|l|}\hline & \text { Cheat } & \text { Abide } \\\hline \text { Cheat } & \text { BRU: } \$ 40 ; \text { BW: } \$ 40 & \text { BRU: } \$ 80 ; \text { BW: } \$ 0 \\\hline \text { Abide } & \text { BRU: } \$ 0 ; \text { BW: } \$ 80 & \text { BRU: } \$ 45 ; \text { BW: } \$ 45 \\\hline\end{array}\end{array}$
Refer to the figure above.This game __________ a prisoner's dilemma because __________.

A) is not;cheating has the highest payoff for both firms
B) is;if both firms played their dominated strategy,profits would be higher than if they play their dominant strategies
C) is;if both firms played their dominant strategy,profits would be higher than if they play their dominated strategies
D) is not;neither firm has a dominant strategy

Question 56

Suppose Jordan and Lee are trying to decide what to do on a Friday.Jordan would prefer to see a comedy while Lee would prefer to see a documentary.One documentary and one comedy are showing at the local cinema.The benefit they receive from seeing the films either together or separately are shown in the payoff matrix.Both Jordan and Lee know the information contained in the payoff matrix.They purchase their tickets simultaneously,ignorant of the other's choice. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Jordan }\\\text {Lee}\begin{array}{|l|l|l|}\hline & {\text { Comedy }} & {\text { Documentary }} \\\hline \text { Comedy } & \begin{array}{l}\text { Lee: } 3 \\\text { Jordan: } 5\end{array} & \begin{array}{l}\text { Lee: } 1 \\\text { Jordan } 1\end{array} \\\hline \text { Documentory } & \text { Lee } 2 & \text { Lee: } 5 \\& \text { Jordan: } 2 & \text { Jordan 3 } \\\hline\end{array}\end{array}$
Refer to the figure above.Jordan has:

A) no dominant strategy.
B) a dominant strategy of seeing a comedy.
C) a dominant strategy of seeing a documentary.
D) two dominant strategies,depending on Lee's choice.

Question 57

A decision tree is used when modeling:

A) any type of game.
B) simultaneous decisions.
C) a prisoner's dilemma.
D) games in which timing matters.

Question 58

Cigarette manufacturers once relied heavily on TV advertising.According to the textbook,when the government banned TV ads,the cigarette manufacturers:

A) supported the ban due to their concern over health effects of smoking.
B) felt their First Amendment rights were being violated.
C) were made worse off because the ban significantly reduced cigarette sales.
D) benefited because their advertising prisoner's dilemma was solved.

Question 59

A strategy that limits defection in a repeated prisoner's dilemma game is:

A) a Nash equilibrium.
B) tit-for-tat.
C) a cartel.
D) an ultimatum bargaining game.

Question 60

The table below shows the payoffs to the running of negative and positive political ads by two candidates.The payoffs are the percentage increase or decrease in the number of voters willing to vote for the candidate as a result of the campaign styles. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Republican Candidate }\\\text { Democratic Candidate }\begin{array}{|l|l|l|}\hline & \text { Positive Campaign } & \text { Negative Campaign } \\\hline {\text { Positive Campaign }} & \begin{array}{l}\text { Democrat } 0 \% \\\text { Republican: } 0 \%\end{array} & \begin{array}{l}\text { Democrat:-3\% } \\\text { Republican: }+3 \%\end{array} \\\hline {\text { Negative Campaign }} & \begin{array}{l}\text { Democrat: }+5 \% \\\text { Republican: }-5 \%\end{array} & \begin{array}{l}\text { Democrat }-2 \% \\\text { Republican: }-2 \%\end{array} \\\hline\end{array}\end{array}$
Refer to the figure above.Given the payoff matrix,the Nash equilibrium will be that:

A) both political parties will run positive campaigns.
B) the Republicans will run a positive campaign and the Democrats a negative campaign.
C) as long as one party runs a positive campaign,the other will,too.But as soon as one party starts running a negative campaign the other will follow.
D) both political parties will run negative campaigns.

Question 61

One thousand adults live in Milltown.All of them leave work at 4:30 p.m.every day and arrive home at exactly 5:00.They all go to bed at 9 p.m.Three fundraisers,Alpha,Beta,and Charlie,have targeted Milltown's population.Because the charities raising the funds are identical,the first to call a willing donor will get the donation.
Refer to the information given above.The solution to the firms' problem will involve:

A) each firm differentiating itself from the others by timing.
B) each firm differentiating itself from the others by geographic location.
C) exploiting perfectly inelastic demand.
D) each firm differentiating itself from the others by quality.

Question 62

One thousand adults live in Milltown.All of them leave work at 4:30 p.m.every day and arrive home at exactly 5:00.They all go to bed at 9 p.m.Three fundraisers,Alpha,Beta,and Charlie,have targeted Milltown's population.Because the charities raising the funds are identical,the first to call a willing donor will get the donation.
Refer to the information given above.Calls made by fundraisers at each firm will tend to:

A) be evenly distributed throughout the evening.
B) cluster near 5:00 p.m.
C) cluster near 6:00 p.m.
D) cluster near 7:00 p.m.

Question 63

Hotelling's model has been used to describe differentiation in the political "market".Suppose that 100 voters are evenly arrayed between the extreme left and the extreme right on the political spectrum,and that all voters vote,and they always vote for the candidate closest to them on this spectrum.The numbers on this spectrum represent the number of voters lying to the left of the number.So,at the midpoint,fifty voters lie to the left and fifty to the right.At the extreme right end,all 100 voters lie to the left.
Refer to the information given above.If Candidate X is running for office against Candidate Z,the result will be that:

A) all voters to the left of Z will vote for X,and all voters to the right of Z will vote for Z.
B) all voters who would have voted for Candidate Y will vote for Candidate X.
C) Candidate Z will certainly win.
D) Candidate X might win,but the result is uncertain.

Question 64

Suppose Jordan and Lee are trying to decide what to do on a Friday.Jordan would prefer to see a comedy while Lee would prefer to see a documentary.One documentary and one comedy are showing at the local cinema.The benefit they receive from seeing the films either together or separately are shown in the payoff matrix.Both Jordan and Lee know the information contained in the payoff matrix.They purchase their tickets simultaneously,ignorant of the other's choice. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Jordan }\\\text {Lee}\begin{array}{|l|l|l|}\hline & {\text { Comedy }} & {\text { Documentary }} \\\hline \text { Comedy } & \begin{array}{l}\text { Lee: } 3 \\\text { Jordan: } 5\end{array} & \begin{array}{l}\text { Lee: } 1 \\\text { Jordan } 1\end{array} \\\hline \text { Documentory } & \text { Lee } 2 & \text { Lee: } 5 \\& \text { Jordan: } 2 & \text { Jordan 3 } \\\hline\end{array}\end{array}$
Refer to the figure above.Suppose a timing element is added to the game,and that Jordan buys a ticket first.While Lee did not see which ticket Jordan bought,Lee does know the values in the payoff matrix and that Jordan has purchased first.Assuming that Jordan and Lee are both self-interested,Lee can infer:

A) that Jordan bought a ticket for the documentary.
B) that Jordan did not exploit the first-mover advantage.
C) that Jordan bought a ticket for the comedy.
D) that Jordan's threat to buy a ticket for the comedy is not credible.

Question 65

When players cannot achieve their goals because they are unable to make credible threats or promises,the situation is called:

A) the prisoner's dilemma.
B) a Nash equilibrium.
C) a failure of dominant strategies.
D) a commitment problem.

Question 66

Hotelling's model has been used to describe differentiation in the political "market".Suppose that 100 voters are evenly arrayed between the extreme left and the extreme right on the political spectrum,and that all voters vote,and they always vote for the candidate closest to them on this spectrum.The numbers on this spectrum represent the number of voters lying to the left of the number.So,at the midpoint,fifty voters lie to the left and fifty to the right.At the extreme right end,all 100 voters lie to the left.
Refer to the information given above.If Candidate Y is running against Candidate Z:

A) Candidate Y will have an incentive to move to the left,and Candidate Z will have an incentive to move to the right.
B) Both candidates will have an incentive to move to the left.
C) Both candidates will have an incentive to move toward each other's position.
D) Neither candidate has any incentive to move.

Question 67

Hotelling's model has been used to describe differentiation in the political "market".Suppose that 100 voters are evenly arrayed between the extreme left and the extreme right on the political spectrum,and that all voters vote,and they always vote for the candidate closest to them on this spectrum.The numbers on this spectrum represent the number of voters lying to the left of the number.So,at the midpoint,fifty voters lie to the left and fifty to the right.At the extreme right end,all 100 voters lie to the left.
Refer to the information given above.Suppose Candidate X is running against Candidate Y.If Candidate Z enters the race:

A) approximately half of the voters who were going to vote for X will now vote for Z.
B) X will certainly win because Y and Z compete for the same voters.
C) all of the voters who were going to vote for Y will now vote for Z.
D) most of the voters who were going to vote for Y will now vote for Z.

Question 68

Hotelling's model has been used to describe differentiation in the political "market".Suppose that 100 voters are evenly arrayed between the extreme left and the extreme right on the political spectrum,and that all voters vote,and they always vote for the candidate closest to them on this spectrum.The numbers on this spectrum represent the number of voters lying to the left of the number.So,at the midpoint,fifty voters lie to the left and fifty to the right.At the extreme right end,all 100 voters lie to the left.
Refer to the information given above.If Candidate X is running against Candidate Z,by moving to the right Candidate X would:

A) lose some votes from voters on the far left but gain approximately the same number of votes from Z.
B) not lose any votes from voters on the left and gain some from Z.
C) force Z to move farther to the right in order to keep the same number of votes.
D) win the election if the move placed X anywhere to the right of the 25 mark on the spectrum.

Question 69

The last time you went on a road trip,you noticed that there were several fast food outlets clustered near some freeway exits,but none at the others.Now that you are familiar with Hotelling's model,you know that the reason for this is:

A) zoning laws.
B) firms vying for a favorable location.
C) failure by the firms to correctly distribute themselves.
D) the existence of fast food cartels.

Question 70

Hotelling's model has been used to describe differentiation in the political "market".Suppose that 100 voters are evenly arrayed between the extreme left and the extreme right on the political spectrum,and that all voters vote,and they always vote for the candidate closest to them on this spectrum.The numbers on this spectrum represent the number of voters lying to the left of the number.So,at the midpoint,fifty voters lie to the left and fifty to the right.At the extreme right end,all 100 voters lie to the left.
Refer to the information given above.To an economic naturalist,this model would help to explain why political candidates:

A) take more extreme positions than are held by the general population.
B) move toward more centrist positions during a campaign season.
C) work to bring federally funded projects to their home districts.
D) are loyal to their political parties.

Question 71

Suppose that you have noticed that almost all of the car dealers in your city are located along a 3-block stretch of the same street.A likely reason for this clustering of car dealers is that:

A) the dealers are better able to form a cartel.
B) each dealer is attempting to locate closest to the customers.
C) there is a social norm in that city that dealers follow in choosing location.
D) each dealer sells a different brand of car,so they are not competitors and do not have to be concerned about the other dealers' locations.

Question 72

Suppose Jordan and Lee are trying to decide what to do on a Friday.Jordan would prefer to see a comedy while Lee would prefer to see a documentary.One documentary and one comedy are showing at the local cinema.The benefit they receive from seeing the films either together or separately are shown in the payoff matrix.Both Jordan and Lee know the information contained in the payoff matrix.They purchase their tickets simultaneously,ignorant of the other's choice. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Jordan }\\\text {Lee}\begin{array}{|l|l|l|}\hline & {\text { Comedy }} & {\text { Documentary }} \\\hline \text { Comedy } & \begin{array}{l}\text { Lee: } 3 \\\text { Jordan: } 5\end{array} & \begin{array}{l}\text { Lee: } 1 \\\text { Jordan } 1\end{array} \\\hline \text { Documentory } & \text { Lee } 2 & \text { Lee: } 5 \\& \text { Jordan: } 2 & \text { Jordan 3 } \\\hline\end{array}\end{array}$
Refer to the figure above.Suppose Jordan picks first and chooses the comedy,which Lee observes,and then Lee chooses the comedy.The reason Lee chose the comedy is that:

A) Lee receives a higher payoff choosing comedy when Jordan has chosen comedy.
B) Lee must establish a reputation for keeping promises even if it is not in Lee's immediate self-interest to do so.
C) selecting the comedy is Lee's dominant strategy regardless of Jordan's choice.
D) this is a prisoner's dilemma,and so the players do best when choosing the same strategy.

Question 73

One thousand adults live in Milltown.All of them leave work at 4:30 p.m.every day and arrive home at exactly 5:00.They all go to bed at 9 p.m.Three fundraisers,Alpha,Beta,and Charlie,have targeted Milltown's population.Because the charities raising the funds are identical,the first to call a willing donor will get the donation.
Refer to the information given above.To an economic naturalist,this scenario would explain why:

A) fundraisers form cartels.
B) so many fundraising phone calls seem to be at dinnertime.
C) fundraising has been outsourced to Asian countries.
D) fundraisers use the mail to solicit donations.

Question 74

One thousand adults live in Milltown.All of them leave work at 4:30 p.m.every day and arrive home at exactly 5:00.They all go to bed at 9 p.m.Three fundraisers,Alpha,Beta,and Charlie,have targeted Milltown's population.Because the charities raising the funds are identical,the first to call a willing donor will get the donation.
Refer to the information given above.Beta's manager has decided that the best time to call is 7:00 because it is exactly halfway between 5:00 p.m.and bedtime.Which of the following is true?

A) Beta is certain to generate the most donations because all potential donors are 2 hours or less away from a phone call.
B) Alpha and Charlie will have an incentive to also make calls at 7:00,causing clustering at the halfway point in the evening.
C) Alpha and Charlie will divide up the rest of the market,with one choosing to call at 6:00 and the other at 8:00.
D) Beta's manager did not choose wisely.

Question 75

Suppose Jordan and Lee are trying to decide what to do on a Friday.Jordan would prefer to see a comedy while Lee would prefer to see a documentary.One documentary and one comedy are showing at the local cinema.The benefit they receive from seeing the films either together or separately are shown in the payoff matrix.Both Jordan and Lee know the information contained in the payoff matrix.They purchase their tickets simultaneously,ignorant of the other's choice. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Jordan }\\\text {Lee}\begin{array}{|l|l|l|}\hline & {\text { Comedy }} & {\text { Documentary }} \\\hline \text { Comedy } & \begin{array}{l}\text { Lee: } 3 \\\text { Jordan: } 5\end{array} & \begin{array}{l}\text { Lee: } 1 \\\text { Jordan } 1\end{array} \\\hline \text { Documentory } & \text { Lee } 2 & \text { Lee: } 5 \\& \text { Jordan: } 2 & \text { Jordan 3 } \\\hline\end{array}\end{array}$
Refer to the figure above.Lee has:

A) no dominant strategy.
B) a dominant strategy of seeing a comedy.
C) a dominant strategy of seeing a documentary.
D) two dominant strategies,depending on Jordan's choice.

Question 76

Suppose Jordan and Lee are trying to decide what to do on a Friday.Jordan would prefer to see a comedy while Lee would prefer to see a documentary.One documentary and one comedy are showing at the local cinema.The benefit they receive from seeing the films either together or separately are shown in the payoff matrix.Both Jordan and Lee know the information contained in the payoff matrix.They purchase their tickets simultaneously,ignorant of the other's choice. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Jordan }\\\text {Lee}\begin{array}{|l|l|l|}\hline & {\text { Comedy }} & {\text { Documentary }} \\\hline \text { Comedy } & \begin{array}{l}\text { Lee: } 3 \\\text { Jordan: } 5\end{array} & \begin{array}{l}\text { Lee: } 1 \\\text { Jordan } 1\end{array} \\\hline \text { Documentory } & \text { Lee } 2 & \text { Lee: } 5 \\& \text { Jordan: } 2 & \text { Jordan 3 } \\\hline\end{array}\end{array}$
Refer to the figure above.This game has __________ Nash equilibrium(s).

A) 0
B) 1
C) 2
D) 4

Question 77

In sequential games,the player who moves first:

A) always has a first-mover advantage.
B) has a first-mover advantage only when he or she is able to make a credible threat or promise to choose a dominated strategy.
C) has a first-mover advantage only when the second mover fails to choose the dominant strategy.
D) sometimes has an advantage and sometimes has a disadvantage.

Question 78

A monopolistically competitive firm:

A) sells products that are perfect substitutes for its competitors' products,so must compete on the basis of location.
B) sells products that are close substitutes for its competitors' products,so will locate as far away from its competitors as possible.
C) sometimes distinguishes its output from that of its competitors by locating in a more convenient place.
D) will be more successful the more similar its output is to its competitors' output.

Question 79

A commitment problem exists when:

A) players cannot make credible threats or promises.
B) players cannot make threats.
C) there is a prisoner's dilemma.
D) players cannot make promises.

Question 80

Suppose Jordan and Lee are trying to decide what to do on a Friday.Jordan would prefer to see a comedy while Lee would prefer to see a documentary.One documentary and one comedy are showing at the local cinema.The benefit they receive from seeing the films either together or separately are shown in the payoff matrix.Both Jordan and Lee know the information contained in the payoff matrix.They purchase their tickets simultaneously,ignorant of the other's choice. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Jordan }\\\text {Lee}\begin{array}{|l|l|l|}\hline & {\text { Comedy }} & {\text { Documentary }} \\\hline \text { Comedy } & \begin{array}{l}\text { Lee: } 3 \\\text { Jordan: } 5\end{array} & \begin{array}{l}\text { Lee: } 1 \\\text { Jordan } 1\end{array} \\\hline \text { Documentory } & \text { Lee } 2 & \text { Lee: } 5 \\& \text { Jordan: } 2 & \text { Jordan 3 } \\\hline\end{array}\end{array}$
Refer to the figure above.This game:

A) is a prisoner's dilemma.
B) is not a prisoner's dilemma.
C) is an ultimatum bargaining game.
D) has no Nash equilibrium.