Question 1

Consider the accompanying payoff matrix.  
  Suppose both players make their choices simultaneously and independently. What is the Nash equilibrium of this game?

Accepted Answer

A) Player A chooses Down and player B chooses Left. 
B) Player A chooses Up and player B chooses Right. 
C) Player A chooses Up and player B chooses Left. 
D) Player A chooses Down and player B chooses Right 
A) Player A chooses Down and player B chooses Left. 
B) Player A chooses Up and player B chooses Right. 
C) Player A chooses Up and player B chooses Left. 
D) Player A chooses Down and player B chooses Right

Question 2

Something that changes incentives so as to make otherwise empty threats or promises credible is called a:

Accepted Answer

A) Nash equilibrium. 
B) commitment device. 
C) strategic device. 
D) dominant strategy. 
A) Nash equilibrium. 
B) commitment device. 
C) strategic device. 
D) dominant strategy.

Question 3

The dilemma in a prisoner's dilemma is that:

Accepted Answer

A) the outcome is random, so players are uncertain about which strategy to play. 
B) only one player has a dominant strategy, but the other player is uncertain about what to do. 
C) the players would be better off if they both played a dominated strategy. 
D) the players may be trapped in a game they don't know how to play. 
A) the outcome is random, so players are uncertain about which strategy to play. 
B) only one player has a dominant strategy, but the other player is uncertain about what to do. 
C) the players would be better off if they both played a dominated strategy. 
D) the players may be trapped in a game they don't know how to play.

Question 4

Consider the accompanying payoff matrix.   If Row Resorts keeps its rates high, then Column Cruises would receive the highest payoff if it:

Accepted Answer

A) kept its rates high. 
B) offered reduced rates. 
C) agreed with Row Resorts to reduce their rates at exactly the same time. 
D) choose either strategy because it will have the same payoff in either case. 
A) kept its rates high. 
B) offered reduced rates. 
C) agreed with Row Resorts to reduce their rates at exactly the same time. 
D) choose either strategy because it will have the same payoff in either case.

Question 5

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.   The equilibrium to the game results in ________ for Amy and Tracy relative to what they could get if they could solve their ________.

Accepted Answer

A) lower payoffs; prisoner's dilemma 
B) higher payoffs; commitment problem 
C) lower payoffs; credible threat 
D) lower payoffs; commitment problem 
A) lower payoffs; prisoner's dilemma 
B) higher payoffs; commitment problem 
C) lower payoffs; credible threat 
D) lower payoffs; commitment problem

Question 6

Refer to the figure below. In this game, how many dominant strategies does Player A have?

Accepted Answer

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

Question 7

Suppose the market for bottled water is served by two oligopolists. If they reach an agreement to restrict production and charge a price above marginal cost, then:

Accepted Answer

A) they will earn a larger profit than a monopolist would have earned. 
B) they will charge a higher price than a monopolist would have charged. 
C) their agreement is likely to eventually collapse. 
D) neither firm will have an incentive to cheat on the agreement since it benefits them both. 
A) they will earn a larger profit than a monopolist would have earned. 
B) they will charge a higher price than a monopolist would have charged. 
C) their agreement is likely to eventually collapse. 
D) neither firm will have an incentive to cheat on the agreement since it benefits them both.

Question 8

Refer to the figure below. What is the Nash equilibrium of this game?

Accepted Answer

A) A chooses Up, B chooses Right 
B) A chooses Up, B chooses Left 
C) A chooses Down, B chooses Right 
D) A chooses Down, B chooses Left 
A) A chooses Up, B chooses Right 
B) A chooses Up, B chooses Left 
C) A chooses Down, B chooses Right 
D) A chooses Down, B chooses Left

Question 9

Suppose Grandis and Immanis are the only two companies that sell the product whose market demand curve is shown in the accompanying figure. For both companies, both average total cost and marginal cost are constant and equal to $2 (ATC = MC = $2).   Suppose Grandis and Immanis agree to collude by both charging the price a monopolist would charge and each producing half of the monopolist's profit-maximizing level of output. Grandis, however, decides to cheat on the collusive agreement. If Grandis charges $1 less than the monopoly price while Immanis continues to charge the monopoly price, then Grandis will earn a profit of ________ per day.

Accepted Answer

A) $160 
B) $80 
C) $40 
D) $20 
A) $160 
B) $80 
C) $40 
D) $20

Question 10

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product.   Suppose Quick Buck and Pushy Sales decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Quick Buck cheats by reducing its price to $1 and Pushy Sales matches the price cut, then if consumers are evenly split between the two firms, what will be Quick Buck's economic profit?

Accepted Answer

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

Consider the accompanying payoff matrix. Suppose both players make their choices simultaneously and independently. What is the Nash equilibrium of this game?

Something that changes incentives so as to make otherwise empty threats or promises credible is called a:

The dilemma in a prisoner's dilemma is that:

Consider the accompanying payoff matrix. If Row Resorts keeps its rates high, then Column Cruises would receive the highest payoff if it:

Refer to the figure below. In this game, how many dominant strategies does Player A have?

Suppose the market for bottled water is served by two oligopolists. If they reach an agreement to restrict production and charge a price above marginal cost, then:

Refer to the figure below. What is the Nash equilibrium of this game?

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

Consider the accompanying payoff matrix. Suppose both players make their choices simultaneously and independently. What is the Nash equilibrium of this game?

Something that changes incentives so as to make otherwise empty threats or promises credible is called a:

The dilemma in a prisoner's dilemma is that:

Consider the accompanying payoff matrix. If Row Resorts keeps its rates high, then Column Cruises would receive the highest payoff if it:

Refer to the figure below. In this game, how many dominant strategies does Player A have?

Suppose the market for bottled water is served by two oligopolists. If they reach an agreement to restrict production and charge a price above marginal cost, then:

Refer to the figure below. What is the Nash equilibrium of this game?

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