Question 1

Relative to a world in which some people are motivated by nonmaterial incentives, if all people were motivated solely by financial incentives, then:

Accepted Answer

A) transactions in the business world would be the same, but personal interactions would not. 
B) economic efficiency would be achieved more often. 
C) there would be no commitment problems. 
D) both business transactions and personal interactions would be different. 
A) transactions in the business world would be the same, but personal interactions would not. 
B) economic efficiency would be achieved more often. 
C) there would be no commitment problems. 
D) both business transactions and personal interactions would be different.

Question 2

Hotelling's model has been used to describe differentiation in the political "market." Suppose that 100 voters are evenly distributed 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.   If Candidate Y is running against Candidate Z:

Accepted Answer

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. 
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 3

The three elements of a game are:

Accepted Answer

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. 
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 4

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

Accepted Answer

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 if they both 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 if they both had chosen the dominant strategy. 
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 if they both 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 if they both had chosen the dominant strategy.

Question 5

Consider the accompanying payoff matrix.   If both firms offer reduced rates, each earns ________, and if both firms keep their rates high, each earns ________.

Accepted Answer

A) 300; 50 
B) 50; 300 
C) 300; 500 
D) 500; 300 
A) 300; 50 
B) 50; 300 
C) 300; 500 
D) 500; 300

Question 6

Hotelling's model has been used to describe differentiation in the political "market." Suppose that 100 voters are evenly distributed 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.   If Candidate X is running for office against Candidate Z, then:

Accepted Answer

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 Y will vote for X. 
C) Candidate Z will win. 
D) Candidate X might win. 
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 Y will vote for X. 
C) Candidate Z will win. 
D) Candidate X might win.

Question 7

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 payoffs they receive from seeing the films either together or separately are shown in the payoff matrix below. Both Jordan and Lee know the information contained in the payoff matrix. They purchase their tickets simultaneously, ignorant of the other's choice.  
  Which of the following statements is true?

Accepted Answer

A) Jordan does not have a dominant strategy. 
B) For Jordan, seeing a comedy is a dominant strategy. 
C) For Jordan, seeing a documentary is a dominant strategy. 
D) Jordon's dominant strategy depends on Lee's choice. 
A) Jordan does not have a dominant strategy. 
B) For Jordan, seeing a comedy is a dominant strategy. 
C) For Jordan, seeing a documentary is a dominant strategy. 
D) Jordon's dominant strategy depends on Lee's choice.

Question 8

Tracy and Amy are playing a game in which Tracy has the first move at X in the decision tree shown below. Once Tracy has chosen either the top or bottom branch at X, Amy, who can see what Tracy has chosen, must choose the top or bottom branch at Y or Z. Both players know the payoffs at the end of each branch.   If before Tracy chose, Amy could make a credible commitment to choose either the top or bottom branch when her turn came, then we would expect Tracy to get a payoff of ________ and Amy to get a payoff of ________.

Accepted Answer

A) 25; 225 
B) 300; 200 
C) 75; 150 
D) 125; 125 
A) 25; 225 
B) 300; 200 
C) 75; 150 
D) 125; 125

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 two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. In this situation, the Nash equilibrium yields a:

Accepted Answer

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. 
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 10

Miniville is an isolated town located on the southern shore of Lake Condescending, a very large lake. The western edge of Miniville is adjacent to impassable mountains and there are no towns or businesses for many miles to the east. The 300 residents of Miniville are evenly distributed along 3 miles of shoreline on the lake, east of the mountains. Lake Shore Drive, the only street in town, provides access to Miniville's homes and businesses. All residents live between the lake and the street; businesses locate on the other side of the street. Lake Shore Drive is 3 miles long, and the points labeled A, B, and C are 1, 2, and 3 miles from the western end of Lake Shore Drive, respectively. All residents of Miniville shop at the store located closest to their homes.   If the first store to open in Miniville is located at A, to maximize the number of customers it attracts, the next store to open should locate:

Accepted Answer

A) just west of A. 
B) at B. 
C) at C. 
D) just east of A. 
A) just west of A. 
B) at B. 
C) at C. 
D) just east of A.

Question 11

According to the textbook, the owners of restaurants encourage tipping in order to:

Accepted Answer

A) insure that their waiters earn enough money. 
B) solve a commitment problem with their wait staff. 
C) sustain cooperation in a repeated prisoner's dilemma. 
D) avoid playing a dominated strategy. 
A) insure that their waiters earn enough money. 
B) solve a commitment problem with their wait staff. 
C) sustain cooperation in a repeated prisoner's dilemma. 
D) avoid playing a dominated strategy.

Question 12

OPEC is an example of a:

Accepted Answer

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

Question 13

Player 1 and Player 2 are playing a game in which Player 1 has the first move at A in the decision tree shown below. Once Player 1 has chosen either Up or Down, Player 2, who can see what Player 1 has chosen, must choose Up or Down at B or C. Both players know the payoffs at the end of each branch.   If Player 2 could make a credible commitment to choose either Up or Down when his or her turn came, then what would Player 2 do?

Accepted Answer

A) Player 2 would not commit to choosing either strategy. 
B) Player 2 would commit to choosing Up. 
C) Player 2 would commit to choosing Down. 
D) Player 2 would commit to mimicking Player 1's strategy. 
A) Player 2 would not commit to choosing either strategy. 
B) Player 2 would commit to choosing Up. 
C) Player 2 would commit to choosing Down. 
D) Player 2 would commit to mimicking Player 1's strategy.

Question 14

Mexico and the members of OPEC produce crude oil. Realizing that it would be in their best interests to form an agreement on production goals, a meeting is arranged and an informal, verbal agreement is reached. If both Mexico and OPEC abide by the agreement, then OPEC's profit will be $200 million and Mexico's profit will be $100 million. If both Mexico and OPEC cheat on the agreement, then OPEC's profit will be $175 million and Mexico's profit will be $80 million. If only OPEC cheats, then OPEC's profit will be $185 million, and Mexico's profit will be $60 million. If only Mexico cheats, then Mexico's profit will be $110 million, and OPEC's profit will be $150 million. Which of the following statements is correct?

Accepted Answer

A) Mexico does not have dominant strategy. 
B) Mexico's dominant strategy is to abide by the agreement. 
C) Mexico does not have a dominated strategy. 
D) Mexico's dominant strategy is to cheat on the agreement. 
A) Mexico does not have dominant strategy. 
B) Mexico's dominant strategy is to abide by the agreement. 
C) Mexico does not have a dominated strategy. 
D) Mexico's dominant strategy is to cheat on the agreement.

Question 15

In tit-for-tat, if your partner ________ in your first interaction, then you will ________ in your next interaction.

Accepted Answer

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

Question 16

Hotelling's model has been used to describe differentiation in the political "market." Suppose that 100 voters are evenly distributed 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.   To an economic naturalist, this model helps explain why political candidates:

Accepted Answer

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

Question 17

Lee and Cody are playing a game in which Lee has the first move at A in the decision tree shown below. Once Lee has chosen either aggression or cooperation, Cody, who can see what Lee has chosen, must choose either aggression or cooperation at B or C. Both players know the payoffs at the end of each branch.   If Lee chooses aggression, Cody will respond with ________, and if Lee chooses cooperation, Cody will respond with ________.

Accepted Answer

A) aggression; cooperation 
B) aggression; aggression 
C) cooperation; aggression 
D) cooperation; cooperation 
A) aggression; cooperation 
B) aggression; aggression 
C) cooperation; aggression 
D) cooperation; cooperation

Question 18

Refer to the figure below. In the matrix above:

Accepted Answer

A) Jess has a dominant strategy, but Cory does not. 
B) Cory has a dominant strategy, but Jess does not. 
C) both Cory and Jess have the same dominant strategy. 
D) neither Cory nor Jess has a dominant strategy. 
A) Jess has a dominant strategy, but Cory does not. 
B) Cory has a dominant strategy, but Jess does not. 
C) both Cory and Jess have the same dominant strategy. 
D) neither Cory nor Jess has a dominant strategy.

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 two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. The clear outcome of this game is that:

Accepted Answer

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

Question 20

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

Accepted Answer

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

Relative to a world in which some people are motivated by nonmaterial incentives, if all people were motivated solely by financial incentives, then:

The three elements of a game are:

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

Consider the accompanying payoff matrix. If both firms offer reduced rates, each earns , and if both firms keep their rates high, each earns .

According to the textbook, the owners of restaurants encourage tipping in order to:

OPEC is an example of a:

In tit-for-tat, if your partner in your first interaction, then you will in your next interaction.

Refer to the figure below. In the matrix above:

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

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

Exam 9: Games and Strategic Behavior

Relative to a world in which some people are motivated by nonmaterial incentives, if all people were motivated solely by financial incentives, then:

The three elements of a game are:

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

Consider the accompanying payoff matrix. If both firms offer reduced rates, each earns ________, and if both firms keep their rates high, each earns ________.

According to the textbook, the owners of restaurants encourage tipping in order to:

OPEC is an example of a:

In tit-for-tat, if your partner ________ in your first interaction, then you will ________ in your next interaction.

Refer to the figure below. In the matrix above:

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

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

Consider the accompanying payoff matrix. If both firms offer reduced rates, each earns , and if both firms keep their rates high, each earns .

In tit-for-tat, if your partner in your first interaction, then you will in your next interaction.