Deck 9: Game Theory and Strategic Thinking

Question 1

An example of a real-life rule that might constrain people's behavior is:

A) minimum wage legislation.
B) having 24 hours in a day.
C) the earth's limited supply of oil.
D) All of these are examples of real-life rules.

Answer 1

D

Question 2

All games involve which of the following?

A) A predictable outcome
B) Payoffs
C) Full information
D) A game master

Answer 2

B

Question 3

In games,rules:

A) define the actions that are allowed in a game.
B) need to be loosely adhered to in order to predict an outcome.
C) define the winners of a game.
D) outline the wrong choices that could be made in a game.

Answer 3

A

Question 4

The prisoner's dilemma is a game of strategy:

A) in which people make rational choices that lead to a less-than-ideal result for all.
B) in which people make rational choices that lead to the ideal result for all.
C) that leads everyone to be as well off as possible without making another worse off.
D) that leads people to make irrational choices that lead to the ideal result for all.

Question 5

While everyone wants a clean environment,it can be very hard to achieve.An approach governments could take to promote that outcome is to:

A) create social norms.
B) create and enforce strict laws and heavy fines.
C) influence individual's incentives.
D) All of these are ways governments can get the "green" behavior they want.

Question 6

When your outcomes depend on another's choices,asking __________________ is the key to good decision making.

A) how will others respond
B) what the wants and constraints are of those involved
C) what the trade-offs are
D) why everyone isn't already doing it

Question 7

Behaving strategically:

A) means recognizing that the actions of others will affect the trade-offs you face, and acting accordingly.
B) is an essential part of game theory.
C) involves rational decision making.
D) All of these statements are true.

Question 8

Game theory is:

A) the study of how people behave strategically under different circumstances.
B) used to predict the winners of only certain types of strategic games.
C) used to evaluate the microeconomic choices that involve probabilities of different outcomes.
D) the study of games of chance like solitaire or betting on horse races.

Question 9

To economists,games are:

A) just recreational pursuits like chess, Monopoly, or poker.
B) any situation in which players pursue strategies designed to achieve their goals.
C) situations in which individuals act against their own interest for fun.
D) None of these statements are true.

Question 10

The study of how people behave strategically under different circumstances is called:

A) game theory.
B) game strategy.
C) strategy optimization.
D) strategy theory.

Question 11

Game theory is:

A) the study of how people behave strategically under different circumstances.
B) used by economists to evaluate behavior in a variety of settings.
C) a useful tool in predicting strategic behavior.
D) All of these statements are true.

Question 12

Economic games can be used to analyze decisions around which of the following situations?

A) War
B) Business
C) Environmental protection
D) All of these situations.

Question 13

All games involve which of the following?

A) Multiple players
B) Strategies
C) Payoffs
D) All games involve all of these things.

Question 14

All games involve which of the following?

A) Strategies
B) Someone to enforce the rules
C) Cards or dice
D) Full information

Question 15

To economists,a game is:

A) any situation in which players pursue strategies designed to achieve their goals.
B) a trivial pursuit that should not be used to analyze the economy or its actors.
C) a way to simplify and minimize the true importance of situations like war.
D) All of these statements are true.

Question 16

In games,strategies are:

A) the outcomes players want to achieve.
B) the same for everyone to achieve the same goal.
C) the plans of action that players follow to achieve their goals.
D) All of these statements are true.

Question 17

When the trade-offs you face are determined by the choices someone else will make,behaving rationally involves:

A) behaving strategically.
B) ignoring the behavior of other actors.
C) acting in a way to help others.
D) All of these statements are true.

Question 18

Behaving strategically means:

A) evaluating decisions in which players act in their own self-interest, but the interplay of those decisions does not exist.
B) acting to achieve a goal by withholding key information from the person with whom an exchange is being made.
C) acting to achieve a goal by anticipating the interplay between your own and others' decisions.
D) evaluating the impact of your choices on an uninvolved third party.

Question 19

In real life,people's behavior is constrained by:

A) laws of nature.
B) legislated rules of society.
C) costs of various actions.
D) All of these are rules that constrain people's behavior.

Question 20

All games involve which of the following?

A) Rules
B) Chance events
C) Dice
D) Cards

Question 21

In the prisoner's dilemma game:

A) a cooperative strategy can lead to a more beneficial outcome for both players.
B) a noncooperative strategy will lead to a positive-positive outcome.
C) a stable outcome is impossible.
D) neither player has a dominant strategy.

Question 22

The prisoner's dilemma can be summarized in:

A) a strategy matrix.
B) a strategy tree.
C) a decision matrix.
D) a flowchart.

Question 23

The prisoner's dilemma:

A) can be summarized in a payoff matrix.
B) can involve two players.
C) leads to a less-than-ideal outcome for all players.
D) All of these statements are true.

Question 24

A dominant strategy is one:

A) that is the best one to follow, no matter what strategy other players choose.
B) in which a player is forced to choose given the rules of the game.
C) in which a player must choose, even though it does not optimize his outcome.
D) provides a player with the highest payoff in the game.

Question 25

A dominant strategy:

A) exists in every game.
B) is the best one to follow no matter what strategy other players choose.
C) is always the same for all players of a game.
D) awards the highest achievable payoff in a game.

Question 26

In the prisoner's dilemma game:

A) there is a dominant strategy for both players.
B) there is a dominant strategy for only one player.
C) there is no dominant strategy for either player.
D) there is a dominant strategy for a player depending on what the other player does.

Question 27

In game theory,an example of a payoff could be:

A) being the first mover in a game.
B) sharing information with a select few that others aren't privy to.
C) monetary gains made by a player.
D) giving an advantage to only one player.

Question 28

In the prisoner's dilemma game:

A) neither player has a dominant strategy.
B) both players have a dominant strategy.
C) only one player will ever have a dominant strategy.
D) All of these may be true in a prisoner's dilemma game.

Question 29

The prisoner's dilemma game:

A) is a zero sum game.
B) is a game of chance.
C) is a game with no dominant strategies.
D) is a game with a stable equilibrium.

Question 30

A decision matrix:

A) summarizes the players, strategies, and payoffs associated with a game.
B) outlines the clear outcome of any strategy-based game.
C) shows only the decisions of one player.
D) is not useful in evaluating the strategic choices.

Question 31

In the prisoner's dilemma game:

A) a stable outcome is impossible.
B) only one player has a dominant strategy.
C) a stable outcome is possible.
D) a commitment strategy is needed to reach a stable outcome.

Question 32

An example of a payoff in a game would be:

A) a salary.
B) winning an election.
C) having clean drinking water.
D) All of these are examples of payoffs.

Question 33

In games:

A) there is only one strategy associated with each outcome.
B) there are several strategies that can achieve a single goal.
C) all strategies followed in one particular game should all be similar in order to be successful.
D) if one person's strategy is wildly different from those of others, he will typically come in first or last.

Question 34

The prisoner's dilemma game can involve:

A) only two players.
B) more than two players.
C) multiple organizations.
D) All of these statements are true.

Question 35

When a strategy is the best one to follow no matter what strategy other players choose,it is called a:

A) golden decision.
B) dominated strategy.
C) dominant strategy.
D) zero-sum strategy.

Question 36

In the prisoner's dilemma:

A) a dominant strategy exists for only one player.
B) a non-cooperative outcome is predicted.
C) a cooperative win-win outcome can be predicted.
D) All of these statements are true.

Question 37

Payoffs are:

A) the rewards that come from particular actions.
B) always monetary.
C) things that are only enjoyed by the winner.
D) bribes made to gain some advantage unfairly during a game.

Question 38

The prisoner's dilemma game can be used to describe

A) the game Rock Paper Scissors
B) why candidates in elections go negative.
C) how individuals acting in their self-interest leads to the best outcome overall.
D) a zero sum game.

Question 39

In games,the strategy to reach a particular goal:

A) is the same for everyone.
B) can be different for different players and still achieve the same goal.
C) should be similar to what others have chosen to reach the same goal.
D) has begun to be documented by economists.

Question 40

In the prisoner's dilemma game:

A) if players can communicate in advance, they will always cooperate.
B) if players can communicate in advance, they may still not cooperate.
C) will always choose to cooperate.
D) will only cooperate if they are trustworthy.

Question 41

The game in the figure shown is a version of:

A) a sequential game.
B) a simultaneous game.
C) a cooperative game.
D) an ultimatum.

Question 42

If Nike and Adidas are faced with the game in the figure,we can see that:

A) Nike has a dominant strategy, but Adidas does not.
B) Adidas has a dominant strategy, but Nike does not.
C) Neither company has a dominant strategy.
D) Both companies have a dominant strategy.

Question 43

If Nike and Adidas are faced with the game in the figure shown,we can predict:

A) an outcome that is good for society and less than ideal for the companies.
B) an outcome that is less than ideal for society, but optimal for the companies.
C) that both will follow their dominant strategy and society will lose.
D) None of these is likely to happen.

Question 44

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
The game in the figure shown is a version of:

A) the prisoner's dilemma.
B) the first-mover advantage.
C) a sequential game.
D) a repeated game.

Question 45

According to the figure shown,Nike:

A) has a dominant strategy to charge a high price.
B) does not have a dominant strategy.
C) will reach an optimum outcome by acting in its own self-interest.
D) has a dominant strategy to charge a low price.

Question 46

According to the figure shown,if Nike charges a high price,then Adidas should:

A) charge a high price.
B) charge a low price.
C) leave the market.
D) give an ultimatum.

Question 47

According to the figure shown:

A) there is no stable equilibrium to the game.
B) both players will act in their own self-interest and get a stable, but less than optimum, equilibrium.
C) both players will act in their own self-interest and get an optimum equilibrium that is stable.
D) both players have an incentive to charge a low price and undercut the competition.

Question 48

The stable outcome of the game in the figure shown will be:

A) Nike charges a high price, and Adidas charges a low price.
B) Nike charges a low price, and Adidas charges a high price.
C) Nike and Adidas both charge a low price.
D) Nike and Adidas both charge a high price.

Question 49

If the players in the figure shown act in their own self-interest,then we know that Adidas will earn:

A) $2 million.
B) $8 million.
C) $6 million.
D) $10 million.

Question 50

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
If Sarah and Joe are working on a project together and faced with the choices outlined in the figure shown,we can predict the outcome will be that:

A) both Joe and Sarah put forth low effort.
B) Joe will put forth high effort, and Sarah will put forth low effort.
C) Joe will put forth low effort, and Sarah will put forth high effort.
D) both Joe and Sarah put forth high effort.

Question 51

The game in the figure shown is a version of:

A) the prisoner's dilemma.
B) the first-mover advantage.
C) a sequential game.
D) a repeated game.

Question 52

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
The game in the figure shown is a version of:

A) a sequential game.
B) a simultaneous game.
C) a cooperative game.
D) an ultimatum.

Question 53

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
According to the figure shown,Joe:

A) has a dominant strategy to put forth high effort.
B) does not have a dominant strategy.
C) has a dominant strategy to put forth low effort.
D) will reach an optimum outcome by acting in his own self-interest.

Question 54

The figure shown portrays a game using a:

A) decision tree.
B) decision matrix.
C) flowchart.
D) graph.

Question 55

The outcome of the game in the figure show predicts that Nike will earn profits of:

A) $2 million.
B) $4 million.
C) $10 million.
D) $15 million.

Question 56

According to the figure shown,Adidas:

A) should charge a low price, regardless of what Nike chooses to do.
B) should charge a high price, regardless of what Nike chooses to do.
C) does not have a dominant strategy.
D) should take the first-mover advantage and charge a low price.

Question 57

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
According to the figure shown,if Joe puts forth high effort,then Sarah should:

A) put forth high effort.
B) put forth low effort.
C) leave school.
D) give an ultimatum.

Question 58

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
According to the figure shown,if Sarah puts forth low effort,then Joe should:

A) put forth high effort.
B) put forth low effort.
C) leave the market.
D) give an ultimatum.

Question 59

According to the figure shown,if Adidas charges a low price,then Nike should:

A) charge a high price.
B) leave the market.
C) charge a low price.
D) give an ultimatum.

Question 60

The players of prisoner's dilemma-type games:

A) would be much better off if they could cooperate.
B) have an incentive to never cooperate.
C) have a dominant strategy to never cooperate.
D) All of these statements are true.

Question 61

This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
According to the figure,if The Rock Shop enters the market,MiiTunes should:

A) charge a high price.
B) charge a low price.
C) leave the market.
D) give an ultimatum to The Rock Shop.

Question 62

Games that don't have a dominant strategy:

A) do not have stable equilibrium outcomes.
B) may have stable equilibrium outcomes.
C) always have stable equilibrium outcomes.
D) don't exist; all games have at least one dominant strategy.

Question 63

This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
According to the figure,if MiiTunes charges low prices,The Rock Shop should:

A) enter the market and earn $4 million.
B) enter the market and lose $2 million.
C) not enter the market and earn $0.
D) It cannot be determined what The Rock Shop will do.

Question 64

This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
According to the figure,MiiTunes:

A) has a dominant strategy to charge low prices.
B) does not have a dominant strategy.
C) has a dominant strategy to charge high prices.
D) has more than one dominant strategy.

Question 65

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
The outcome of the game in the figure shown predicts that Joe will earn utility of:

A) 5.
B) 7.
C) 9.
D) 13.

Question 66

If there is no single strategy that is best regardless of other players' behavior:

A) there is no dominant strategy.
B) the dominant strategy will be to defect.
C) a noncooperative equilibrium is the only possible outcome.
D) the game is called a Prisoners' dilemma.

Question 67

A noncooperative equilibrium is one in which:

A) the participants act independently, pursuing only their individual interests.
B) always results in a negative-negative outcome.
C) a dominant strategy exists for both players.
D) each player ignores the actions of the other players.

Question 68

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
According to the figure shown,Sarah:

A) should put forth low effort, regardless of what Joe chooses to do.
B) should put forth high effort, regardless of what Joe choose to do.
C) does not have a dominant strategy.
D) should take the first-mover advantage and put forth low effort.

Question 69

This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
If the two music stores are faced with the game in the figure,we can see that:

A) The Rock Shop has a dominant strategy, but MiiTunes does not.
B) MiiTunes has a dominant strategy, but The Rock Shop does not.
C) neither store has a dominant strategy.
D) both stores have a dominant strategy.

Question 70

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
If the players in the figure shown act in their own self-interest,then we know that Sarah will earn utility of:

A) 6.
B) 10.
C) 7.
D) 15.

Question 71

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
According to the figure shown:

A) there is no stable equilibrium to the game.
B) both will act in their own self-interest and get a stable, but less than optimum, equilibrium.
C) both will act in their own self-interest and get an optimum equilibrium that is stable.
D) both have incentive to put forth high effort.

Question 72

Games:

A) only have one outcome possible.
B) with noncooperative equilibriums are always negative-negative outcomes.
C) may have several stable outcomes.
D) must have a dominant strategy present to reach a stable equilibrium.

Question 73

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
Assume that Joe and Sarah,from the figure shown,are also dating,in addition to working together on the joint school project.Further assume that Joe is madly in love with Sarah,who is an excellent student.Sarah tells Joe that she will break up with him if he does not put forth high effort on this project.This future punishment by Sarah is an example of:

A) a commitment strategy.
B) an effort optimization strategy.
C) an ultimatum.
D) a bargaining strategy.

Question 74

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
If Joe and Sarah are faced with the game in the figure shown,we can see that:

A) Joe has a dominant strategy, but Sarah does not.
B) Sarah has a dominant strategy, but Joe does not.
C) neither student has a dominant strategy.
D) both students have a dominant strategy.

Question 75

This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
If MiiTunes and The Rock Shop are both in the music business and faced with the choices outlined in the figure,we can predict the outcome will be that:

A) MiiTunes charges high prices and The Rock Shop does not enter.
B) there is more than one stable outcome to this game.
C) there is no stable outcome to this game.
D) None of these statements is true.

Question 76

This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
The game between music stores in the figure shows us that:

A) only The Rock Shop has a dominant strategy, and so the outcome cannot be predicted.
B) only MiiTunes has a dominant strategy, and so the outcome cannot be predicted.
C) neither store has a dominant strategy, and so the outcome cannot be predicted.
D) None of these statements is true.

Question 77

This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade.They both will enjoy a higher grade when more effort is put into the project,but they also get pleasure from goofing off and not working on the project.The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
The outcome of the game in the figure shown will be:

A) Joe puts forth high effort and Sarah puts forth low effort.
B) Joe puts forth low effort and Sarah puts forth high effort.
C) Joe and Sarah both put forth low effort.
D) Joe and Sarah both put forth high effort.

Question 78

This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
If MiiTunes and The Rock Shop are both in the music business and faced with the choices outlined in the figure shown,we can predict the outcome will be that:

A) MiiTunes charges low prices and The Rock Shop does not enter.
B) MiiTunes charges high prices and The Rock Shop enters.
C) MiiTunes charges high prices and The Rock Shop does not enter.
D) MiiTunes charges low prices and The Rock Shop enters.

Question 79

This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
According to the figure,The Rock Shop:

A) should enter the market, regardless of what MiiTunes chooses to do.
B) should not enter the market, regardless of what MiiTunes chooses to do.
C) does not have a dominant strategy.
D) has more than one dominant strategy.

Question 80

This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
Given the dominant strategy of MiiTunes according to the figure,we can predict that The Rock Shop:

A) will enter and enjoy profits of $4 million.
B) will enter and lose $2 million.
C) will not enter and earn $0.
D) Their actions cannot be predicted because they do not have a dominant strategy.