Question 1

In the above decision tree,Peter picks first and Anita picks second.Peter and Anita both know the payoffs to each choice for both themselves and each other.
-Refer to the decision tree above.The way the game is structured,it is best for

Accepted Answer

A)   both Peter and Anita to cheat.
B)   Anita to do the opposite of Peter.
C)   Anita to do the same as Peter.
D)   Peter to do the same as Anita.
E)   Peter to do the opposite of what Anita does.F) None of the above
G) A) and C)

Question 2

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

Accepted Answer

A)   a prisoner's dilemma.
B)   a Nash equilibrium.
C)   a failure of dominant strategies.
D)   a commitment problem.
E)   a failure of dominated strategies.F) B) and E)
G) B) and D)

Question 3

The table below shows the payoff matrix in the form of short-run profit for two firms,A and B,for two different strategies,investing in new capital or not investing. 
-Refer to the payoff matrix 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?

Accepted Answer

A)   $0.
B)   $5 million.
C)   $20 million.
D)   $50 million.
E)   $70 million.F) C) and E)
G) B) and E)

Question 4

In the above decision tree,Peter picks first and Anita picks second.Peter and Anita both know the payoffs to each choice for both themselves and each other.
-Refer to the decision tree above.The outcome of this game will be that

Accepted Answer

A)   both will remain faithful.
B)   Peter will cheat and Anita will remain faithful.
C)   both will cheat.
D)   Peter will remain faithful and Anita will cheat.
E)   the fidelity of Peter and Anita is unknown.F) D) and E)
G) All of the above

Question 5

A dominated strategy is one that

Accepted Answer

A)   leads to a higher payoff,regardless of the other player's choice.
B)   leads to a lower payoff,regardless of the other player's choice.
C)   is always selected.
D)   contains the set of all possible strategies.
E)   is present in all games.F) B) and D)
G) B) and C)

Question 6

The table below shows the payoffs to the running of negative and clean political ads by two political candidates.The payoffs are the increase or decrease in the number of voters willing to vote for the candidate. 
-Given the payoff matrix,running negative ads is __________ for __________.

Accepted Answer

A)   a dominated strategy;Harper
B)   a dominated strategy;Ignatieff
C)   a dominant strategy;Harper
D)   neither a dominant or dominated strategy;Ignatieff
E)   neither a dominant or dominated strategy;HarperF) B) and C)
G) A) and B)

Question 7

A payoff matrix

Accepted Answer

A)   shows only the players of the game.
B)   shows only the possible strategies of the game.
C)   summarizes most of the elements of a game.
D)   shows only the payoffs to each of the strategies.
E)   completely summarizes the three elements of a game.F) A) and C)
G) A) and B)

Question 8

In the above decision tree,Peter picks first and Anita picks second.Peter and Anita both know the payoffs to each choice for both themselves and each other.
-In a mostly dishonest world,it would

Accepted Answer

A)   never pay to be honest.
B)   always pay to be dishonest.
C)   pay to be honest with honest people.
D)   pay to be honest with dishonest people.
E)   always pay to be honest.F) None of the above
G) B) and E)

Question 9

Collusive control over price may permit oligopolists to

Accepted Answer

A)   use new technology,achieve economies of scale,and get government subsidies.
B)   achieve economies of scale,reduce costs,and prevent price cheating.
C)   increase product demand,increase product supply,and lower cost.
D)   reduce uncertainty,increase profit,and possibly limit entry of new firms.
E)   make the industry more competitive.F) C) and E)
G) None of the above

Question 10

Games in which players find that playing their dominant strategies results in a lower payoff than playing their dominated strategies is called

Accepted Answer

A)   a Nash equilibrium.
B)   disequilibrium.
C)   a prisoner's dilemma.
D)   an ultimatum equilibrium.
E)   an unfair game.F) C) and E)
G) B) and E)

Question 11

The observation that individuals do not act only on narrow self-interested motives means that

Accepted Answer

A)   game theory is nearly useless.
B)   behaviour appears random.
C)   new avenues are available for solving commitment problems.
D)   society has become more enlightened.
E)   the accuracy of game theory predictions has improved.F) C) and D)
G) B) and C)

Question 12

-Suppose the demand curve shown in the diagram above represents the demand curve for a profit-maximizing cartel with two rival firms of equal size and efficiency,each with zero marginal cost.If the market price is currently set at $1.00 and it is difficult to detect price-altering activities,the dominant strategy for each firm is to

Accepted Answer

A)   raise price to gain market share.
B)   lower price in order to increase society's surplus.
C)   lower price in order to increase its profit.
D)   lower price in order to capture the entire market.
E)   lower price both in order to increase its profit and to capture the entire market.F) B) and E)
G) None of the above

Question 13

Two competitive firms are located side by side.If firm A advertises,firm B will get new customers too,even though it does not have to pay for the advertising cost.The same scenario is true for A if B advertises.If both advertise,the amount of extra revenue generated would just offset the advertising costs.In such case,game theory suggests

Accepted Answer

A)   that only A will advertise.
B)   that only B will advertise.
C)   that both A and B will advertise.
D)   that neither A nor B will advertise.
E)   nothing in terms of predicting the outcome of the game.F) A) and B)
G) B) and E)

Question 14

Cartels would be more stable if

Accepted Answer

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 the agreement.
C)   many firms of different sizes were involved.
D)   demand for the output was more variable.
E)   the member firms were located in different countries.F) D) and E)
G) A) and E)

Question 15

The table below shows the payoff matrix for players A and B to strategies X and Z. 
-Refer to the payoff matrix above.The outcome of this game would be classified as a

Accepted Answer

A)   prisoner's dilemma because the players play their dominant strategies.
B)   prisoner's dilemma because playing their dominated strategies would increase the players' payoffs.
C)   Nash equilibrium because both players have dominant strategies.
D)   disequilibrium.
E)   prisoner's dilemma because both players choose the same strategy.F) B) and E)
G) A) and C)

Question 16

Mexico and OPEC both produce crude oil.Realizing that it would be in their best interest to form an agreement on production goals,a meeting is arranged and an informal,verbal agreement is reached.If both Mexico and OPEC stick to the agreement,OPEC will earn profit of $200 million and Mexico will earn profit of $100 million.If both Mexico and OPEC cheat,then OPEC will earn $175 million and Mexico will earn $80 million.If only OPEC cheats,then OPEC earns $185 million and Mexico $60 million.If only Mexico cheats,then Mexico earns $110 million and OPEC $150 million. 
-Refer to the information given above.Suppose OPEC told Mexico that,in the event Mexico cheats on the agreement,OPEC will cheat as well,but if Mexico does not cheat,neither will OPEC.This is an example of

Accepted Answer

A)   a commitment problem.
B)   a credible threat.
C)   an empty promise.
D)   using preferences as a solution to a commitment problem.
E)   an empty threat.F) A) and E)
G) B) and D)

Question 17

Consider a repeated prisoner's dilemma where firms engage in a tit-for-tat strategy.If your partner _______ on the first interaction you would then _______ in your next interaction with her.

Accepted Answer

A)   defected;cooperate
B)   defected;defect
C)   cooperates;defect
D)   defected;refuse to play
E)   cooperates;refuse to play.F) A) and E)
G) A) and C)

Question 18

Intel is ready to introduce its new microprocessor.In chip manufacturing,as more chips are produced,production yields rise.Thus,Intel can choose between a below-cost pricing strategy (upper branch) to reach the higher-yield zone more quickly,or an above-cost pricing strategy (lower branch) and move to the higher-yield zone more slowly.AMD will introduce its new microprocessor two months after Intel,and faces the same below-cost (upper branch) and above-cost (lower branch) strategies.Writing out the outcomes on the decision tree might prove helpful as you answer the following questions.
-Refer to the decision tree above.Intel will

Accepted Answer

A)   never choose below-cost pricing.
B)   always choose below-cost pricing.
C)   always choose above-cost pricing.
D)   choose above-cost pricing if AMD picks above-cost pricing.
E)   wait to see what AMD does first.F) C) and D)
G) A) and B)

Question 19

Mexico and OPEC both produce crude oil.Realizing that it would be in their best interest to form an agreement on production goals,a meeting is arranged and an informal,verbal agreement is reached.If both Mexico and OPEC stick to the agreement,OPEC will earn profit of $200 million and Mexico will earn profit of $100 million.If both Mexico and OPEC cheat,then OPEC will earn $175 million and Mexico will earn $80 million.If only OPEC cheats,then OPEC earns $185 million and Mexico $60 million.If only Mexico cheats,then Mexico earns $110 million and OPEC $150 million. 
-The distinguishing feature of a cartel is

Accepted Answer

A)   two firms are involved.
B)   firms agree to restrict output to earn higher profit.
C)   inelastic consumer demand.
D)   a formal,written document.
E)   firms agree to restrict membership in the cartel.F) B) and D)
G) D) and E)

Question 20

The payoff matrix below shows the extra profit firms X and Z will earn from two different strategies,A and B. 
-Refer to the payoff matrix above.Strategy B is

Accepted Answer

A)   dominated for firm Z.
B)   dominant for firm X.
C)   dominated for both firms.
D)   dominant for both firms.
E)   dominant for firm Z.F) A) and D)
G) B) and D)

Exam 9: Thinking Strategically

In the above decision tree,Peter picks first and Anita picks second.Peter and Anita both know the payoffs to each choice for both themselves and each other. -Refer to the decision tree above.The outcome of this game will be that

Correct Answer
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Correct Answer
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Collusive control over price may permit oligopolists to

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

Correct Answer
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Correct Answer
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The table below shows the payoff matrix for players A and B to strategies X and Z. -Refer to the payoff matrix above.The outcome of this game would be classified as a

Correct Answer
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The table below shows the payoffs to the running of negative and clean political ads by two political candidates.The payoffs are the increase or decrease in the number of voters willing to vote for the candidate. -Given the payoff matrix,running negative ads is for .

Correct Answer
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Cartels would be more stable if

Correct Answer
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In the above decision tree,Peter picks first and Anita picks second.Peter and Anita both know the payoffs to each choice for both themselves and each other. -In a mostly dishonest world,it would

Correct Answer
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Correct Answer
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In the above decision tree,Peter picks first and Anita picks second.Peter and Anita both know the payoffs to each choice for both themselves and each other. -Refer to the decision tree above.The way the game is structured,it is best for

Correct Answer
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A payoff matrix

Correct Answer
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Correct Answer
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Consider a repeated prisoner's dilemma where firms engage in a tit-for-tat strategy.If your partner _ on the first interaction you would then _ in your next interaction with her.

Correct Answer
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Games in which players find that playing their dominant strategies results in a lower payoff than playing their dominated strategies is called

Correct Answer
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Correct Answer
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Correct Answer
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The payoff matrix below shows the extra profit firms X and Z will earn from two different strategies,A and B. -Refer to the payoff matrix above.Strategy B is

Correct Answer
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The observation that individuals do not act only on narrow self-interested motives means that

Correct Answer
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A dominated strategy is one that

Correct Answer
verified

Exam 9: Thinking Strategically

In the above decision tree,Peter picks first and Anita picks second.Peter and Anita both know the payoffs to each choice for both themselves and each other. -Refer to the decision tree above.The outcome of this game will be that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Collusive control over price may permit oligopolists to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The table below shows the payoff matrix for players A and B to strategies X and Z. -Refer to the payoff matrix above.The outcome of this game would be classified as a

Correct AnswerverifiedShow Answer

The table below shows the payoffs to the running of negative and clean political ads by two political candidates.The payoffs are the increase or decrease in the number of voters willing to vote for the candidate. -Given the payoff matrix,running negative ads is __________ for __________.

Correct AnswerverifiedShow Answer

Cartels would be more stable if

Correct AnswerverifiedShow Answer

In the above decision tree,Peter picks first and Anita picks second.Peter and Anita both know the payoffs to each choice for both themselves and each other. -In a mostly dishonest world,it would

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the above decision tree,Peter picks first and Anita picks second.Peter and Anita both know the payoffs to each choice for both themselves and each other. -Refer to the decision tree above.The way the game is structured,it is best for

Correct AnswerverifiedShow Answer

A payoff matrix

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consider a repeated prisoner's dilemma where firms engage in a tit-for-tat strategy.If your partner _______ on the first interaction you would then _______ in your next interaction with her.

Correct AnswerverifiedShow Answer

Games in which players find that playing their dominant strategies results in a lower payoff than playing their dominated strategies is called

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The payoff matrix below shows the extra profit firms X and Z will earn from two different strategies,A and B. -Refer to the payoff matrix above.Strategy B is

Correct AnswerverifiedShow Answer

The observation that individuals do not act only on narrow self-interested motives means that

Correct AnswerverifiedShow Answer

A dominated strategy is one that

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

The table below shows the payoffs to the running of negative and clean political ads by two political candidates.The payoffs are the increase or decrease in the number of voters willing to vote for the candidate. -Given the payoff matrix,running negative ads is for .

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Consider a repeated prisoner's dilemma where firms engage in a tit-for-tat strategy.If your partner _ on the first interaction you would then _ in your next interaction with her.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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