chapter 17 econ

Games that are played more than once generally

make collusive arrangements easier to enforce.

In the prisoners' dilemma game with Bonnie and Clyde as the players, the likely outcome is

a bad outcome for both players.

Refer to Table 17-11. If both firms follow a dominant strategy, Firm A's profits (losses) will be

$-10

Refer to Table 17-11. If both firms follow a dominant strategy, Firm B's profits (losses) will be

$-10

Refer to Table 17-11. When this game reaches a Nash equilibrium, profits for Firm A and Firm B will be

$-10 and $-10, respectively.

Refer to Table 17-13. If both stores follow a dominant strategy, Lopes's annual profit will grow by

$1.0 million.

Refer to Table 17-13. When this game reaches a Nash equilibrium, annual profit will grow by

$1.5 million for HomeMax and by $1.0 million for Lopes.

Refer to Table 17-13. If both stores follow a dominant strategy, HomeMax's annual profit will grow by

$1.5 million.

Refer to Table 17-13. Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit. If they both agree to cooperate on a strategy that maximizes their joint profits, annual profit will grow by

$2.0 million for Lopes and by $2.5 million for HomeMax.

Refer to Table 17-12. If both countries follow a dominant strategy, the value of trade flow benefits for the United States will be

$65 b

Refer to Table 17-12. If both countries follow a dominant strategy, the value of trade flow benefits for Farland will be

$75 b

Refer to Table 17-12. This particular game

All of the above are correct.

Refer to Table 17-12. Pursuing its own best interests, the U.S. will renew MFN status with Farland

None of the above is correct. In pursuing its own best interests, the United States will in no case renew MFN status with Farland.

Refer to Table 17-11. Pursuing its own best interests, Firm A will concede that cigarette smoke causes lung cancer

None of the above. In pursuing its own best interests, Firm A will in no case concede that cigarette smoke causes lung cancer.

Refer to Table 17-11. Pursuing its own best interests, Firm B will concede that cigarette smoke causes lung cancer

None of the above; in pursuing its own best interests, Firm B will in no case concede that cigarette smoke causes lung cancer.

Refer to Figure 17-1. Which of the following statements is correct?

Regardless of the strategy pursued by ABC, XYZ's best strategy is to produce a high level of output, and for that reason producing a high level of output is a dominant strategy for XYZ.

Other things the same, in which case is the quantity produced the highest?

There are a very large number of firms.

Refer to Table 17-12. If trade negotiators are able to communicate effectively about the consequences of various trade policies (i.e., enter into an agreement about the policy they should adopt), then we would expect the countries to agree to which outcome?

United States $130 b and Farland $275 b

Refer to Table 17-12. When this game reaches a Nash equilibrium, the value of trade flow benefits will be

United States $65 b and Farland $75 b.

When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market, we have

a Nash equilibrium

Suppose a market is initially perfectly competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect

a decrease in market output and an increase in the price of the product

Refer to Figure 17-1. If this game is played only once, then the most likely outcome is that

both firms produce a high level of output

Refer to Table 17-13. Increasing the size of its store and parking lot is a dominant strategy for

both stores.

Refer to Table 17-12. Assume that trade negotiators meet to discuss trade policy between the United States and Farland. If neither party to the negotiation is able to trust the other party, then

each should follow its dominant strategy.

Refer to Table 17-13. Pursuing its own best interest, Lopes will

increase the size of its store and parking lot regardless of the decision made by HomeMax.

Refer to Table 17-13. Pursuing its own best interest, HomeMax will

increase the size of its store and parking lot regardless of the decision made by Lopes.

Refer to Figure 17-1. The dominant strategy for ABC is to

produce high output, and the dominant strategy for XYZ is to produce high output

Refer to Table 17-13. Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit. They should both agree to

refrain from increasing their store and parking lot sizes.

Refer to Table 17-12. Pursuing its own best interests, Farland will impose trade sanctions against U.S. firms

regardless of whether the U.S. renews MFN status with Farland.

. Cartels are difficult to maintain because

there is always tension between cooperation and self-interest in a cartel.