Question 1

If you take a maximin strategy

Accepted Answer

A) you are irrational according to economic definition. 
B) you are ensuring that the other player gets the worst possible outcome. 
C) you are getting the best possible outcome given that the other player does the thing that's worst for you. 
D) then both players are doing the best they can given the payoffs in the game.

Question 2

A single-period duopoly firm can choose output level A or B. The firm decides it will produce level A regardless of what the other firm produces. This decision may occur because

Accepted Answer

A) producing the output level A is a dominant strategy. 
B) this firm has simply decided to always produce at level A. 
C) Both A and B are possible. 
D) None of the above.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Mutually Assured Destruction was a standing policy during the Cold War, in which the United States and the USSR maintained and expanded nuclear arsenals beyond practical levels. What could explain such a phenomenon?

Accepted Answer

A) insane public officials who were bent on world domination 
B) a prisoner's dilemma 
C) a leader-follower type game 
D) tacit collusion

Question 5

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.

Question 6

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) there is never a dominated strategy. 
C) individuals behave irrationally when they behave non-cooperatively. 
D) cooperative behavior leads to lower payoffs than non-cooperative behavior.

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.

Question 8

-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.

Question 9

In the following game, how many Nash equilibria are there?

Accepted Answer

A) 0 
B) 1 
C) 2 
D) unable to determine

Question 10

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.

Question 11

Rock-paper-scissors (Roshambo)is an example of a ________ game.

Accepted Answer

A) simultaneous 
B) sequential 
C) dominant strategy 
D) weakly dominant

Question 12

-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.

Question 13

In game theory, we usually assume that all players

Accepted Answer

A) act rationally. 
B) use the information available to them to decide on a best strategy. 
C) know about the payoffs of the other players. 
D) All of the above.

Question 14

A coordination game

Accepted Answer

A) is a game with multiple Nash equilibria where players can credibly coordinate to select one of the equilibria. 
B) is a game where players coordinate to maximize joint profits. 
C) cannot be solved with cheap talk. 
D) always has one Nash equilibrium and no dominated strategies.

Question 15

In auctions, the winner always pays a price equal to the highest (his)bid.

Accepted Answer

A) True 
 B)False

Question 16

A sale in which property or a service is sold to the highest bidder is called a(n)

Accepted Answer

A) auction. 
B) bidder sale. 
C) competitive market. 
D) austrian bundle.

Question 17

-In the above figure, the Nash product is

Accepted Answer

A) 20. 
B) 40. 
C) 100. 
D) 400.

Question 18

One reason that it might be difficult for a player to determine his best strategy is that

Accepted Answer

A) he might have limited ability to calculate the possible outcomes. 
B) he is irrational. 
C) there is no pure strategy. 
D) there are multiple Nash equilibria.

Question 19

In the above table, if the players use a maximin strategy

Accepted Answer

A) firm A produces a High Quality product and firm B produces a Low Quality product. 
B) the equilibrium choice is the same as using a regular, best response strategy. 
C) both firms produce a High Quality product. 
D) firm A produces a Low Quality product and firm B produces a High Quality product.

Question 20

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.

Exam 12: Game Theory and Business Strategy

If you take a maximin strategy

A single-period duopoly firm can choose output level A or B. The firm decides it will produce level A regardless of what the other firm produces. This decision may occur because

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

Mutually Assured Destruction was a standing policy during the Cold War, in which the United States and the USSR maintained and expanded nuclear arsenals beyond practical levels. What could explain such a phenomenon?

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

One interesting feature of a prisoner's dilemma 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?

-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 following game, how many Nash equilibria are there?

A private auction is an auction in which

Rock-paper-scissors (Roshambo) is an example of a ________ game.

-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 game theory, we usually assume that all players

A coordination game

In auctions, the winner always pays a price equal to the highest (his)bid.

A sale in which property or a service is sold to the highest bidder is called a(n)

-In the above figure, the Nash product is

One reason that it might be difficult for a player to determine his best strategy is that

In the above table, if the players use a maximin strategy

A mixed strategy may