ECON Chapter 12

Suppose it is October 1. You have paid ​$21 comma 00021,000 in tuition and have been attending college classes. ​ However, you are offered a​ full-time job paying ​$22 comma 50022,500 for the next two months. If you take the​ job, you'll have to stop attending classes and withdraw from college for the semester. ​ Unfortunately, at this point in the​ semester, tuition is no longer refundable. You must decide whether to remain enrolled in college. What is the relevant cost of staying in​ school? When deciding whether to remain in​ school, the relevant cost of staying in school is ​$2250022500. ​(Enter your response as a whole​ number.)

22500

Which of the following is an example of a way in which an oligopolistic firm can escape the prisoner's dilemma? A. advertising that it will match its rival's price B. producing more of its product C. reneging on a previous tacit agreement with rival firms to D. charge identical high prices D. ignoring the pricing decisions of the other firms

A. advertising that it will match its rival's price

Which of the following is true of a simultaneous move game? A. It involves strategic interactions among a large number of players. B. All relevant benefits and costs of each action are taken into account. C. Players choose their actions after knowing the action of the first player. D. This game cannot be represented by a payoff matrix.

B. All relevant benefits and costs of each action are taken into account.

Prisoner's dilemma games imply that cooperative behavior between two people or two firms always breaks down. But reality teaches us that people and firms often cooperate successfully to achieve their goals. Why do the results from prisoner's dilemma games fail to predict real-world results? A. Prisoner's dilemma games do not permit people or firms from reneging on agreements, which often occurs in real-word situations. B. The prisoner's dilemma does not apply to most business situations that are repeated over and over. C. Most real-world situations involve more than two people or firms; the prisoner's dilemma is only applicable to situations that involve two parties. D. Prisoner's dilemma games predict the behavior of people and firms that engage in illegal activity; most people and firms do not resort to illegal activity.

B. The prisoner's dilemma does not apply to most business situations that are repeated over and over.

The relationship between a pure-strategy Nash equilibrium and a dominant-strategy equilibrium is that: A. a pure-strategy Nash equilibrium is a special case of a dominant-strategy equilibrium. B. a dominant-strategy equilibrium is a special case of a pure-strategy Nash equilibrium. C. there may not be a dominant-strategy equilibrium, but there always is a pure-strategy Nash equilibrium. D. they are mutually exclusive and exhaustive, in that a dominant-strategy equilibrium is the same thing as a mixed-strategy Nash equilibrium. E. they are the same.

B. a dominant-strategy equilibrium is a special case of a pure-strategy Nash equilibrium.

UPS and FedEx both struggle to deliver the surge of packages they receive during the December holiday season. According to an article in the Wall Street Journal​, in​ 2014, both firms considered charging firms such as Amazon rates that would be 10 percent higher for packages delivered during the week before Christmas. Such higher rates would likely have increased the profits of both firms. Neither UPS nor FedEx raised rates during the holiday season of​ 2014, but both firms did raise them during the 2016 holiday season. Use game theory to explain why in 2014 neither firm raised rates during the holiday​ season, but two years later both firms did. In 2014 neither firm raised rates during the holiday season because they were A. colluding to maximize profits. B. competing in a​ prisoner's dilemma. C. at the equilibrium of an infinitely repeated game. D. cooperating to increase their joint profits. Both firms raised rates two years later because they were A. competing to attract additional customers. B. competing in a​ prisoner's dilemma. C. no longer using their dominant strategies. D. cooperating as in a repeated game.

B. competing in a​ prisoner's dilemma. D. cooperating as in a repeated game.

One interesting feature of a prisoner's dilemma game is that A. individuals behave irrationally when they behave non-cooperatively. B. non-cooperative behavior leads to lower payoffs than cooperative behavior. C. it was only valid before the industrial revolution. D.cooperative behavior leads to lower payoffs than non-cooperative behavior.

B. non-cooperative behavior leads to lower payoffs than cooperative behavior.

All of the following are ways by which existing firms can deter the entry of new firms into an industry except A. continuously producing new and improved products. B. threatening to raise prices. C. advertising products aggressively. D. earning less than maximum profit.

B. threatening to raise prices.

Explain why Van Dyke cited the​ "old advertising​ question" as an example of price anchoring. A. The​ $2,000 watch's value is anchored to the​ $10,000 watch. B. The​ $2,000 watch's value is already known. C. The values of each watch are anchored to their prices. D. The values of the watches are anchored to the appearance of the store.

C. The values of each watch are anchored to their prices.

Scenario: Phillip and Joseph are two classmates who represented their college in a quiz competition as a team and won $500. However, the winning amount was handed over by the organizers to their professor who had accompanied them. The professor gave the money to Phillip and asked him to offer any amount he wants to Joseph. If Joseph accepts the offer, the money would be split in the decided proportion between them. However, if Joseph rejects the offer, the money would go to their college fund.Refer to the scenario above. If Joseph prefers money to fairness, ________. A. he will not accept any offer made by Phillip B. Phillip will offer the lowest possible amount to Joseph C. he will always accept any offer made to him D. he will accept the offer only if Phillip pays him an equal share of the money

C. he will always accept any offer made to him

A best response is ________. A. an action choice that always results in a zero payoff to the opponent B. an action choice that results in equal payoffs to all the players in a game C. one player's optimal action choice taking the other player's action as given D. one player's optimal action choice irrespective of the action of the other player

C. one player's optimal action choice taking the other player's action as given

The prisoner's dilemma illustrates A. how cooperation in strategic situations leads to the economically efficient market outcome. B. why firms have an incentive to cheat on agreements. C. why firms will not cooperate if they behave strategically. D. how oligopolists engage in implicit collusion under strategic situations.

C. why firms will not cooperate if they behave strategically.