eco2023 chapter 14

a four firm concentration ratio measures

A) the fraction of an industry's sales accounted for by the four largest firms.

The prisoner's dilemma illustrates A) why firms will not cooperate if they behave strategically. B) how coopera7on in strategic situa7ons lead to the economically efficient market outcome. C) why firms have an incen7ve to cheat on agreements. D) how oligopolists engage in implicit collusion under strategic situa7ons.

A) why firms will not cooperate if they behave strategically.

Sequential games are often used to analyze which two types of business strategies

B) deterring entry by another firm and bargaining between firms

A Nash equilibrium is A) an equilibrium comprising non-dominant strategies only. B) reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group. C) reached when an oligopoly's market demand and supply intersect. D) reached when each player chooses the best strategy for himself and for the group.

B) reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.

A table that shows the possible payoffs each firm earns from every combina<on of strategies by all firms is called A) a payoff table. B) an earnings table. C) a payoff matrix. D) a strategic matrix.

C) a payoff matrix.

Economies of scale can lead to an oligopolistic market structure because

C) if larger firms have lower costs, new small entrants will not be able to produce at the low costs achieved by the big established firms

A dominant strategy

C) is one that is the best for a firm, no matter what strategies other firms use.

In game theory, the three key characteris<cs of a game are A) winners, losers, and rules. B) risks, rewards, and penal7es. C) rules, strategies, and payoffs. D) rules, regula7ons, and payoffs.

C) rules, strategies, and payoffs.

Sequential games are used to analyze

C) situations in which one firm acts and other firms respond

When an oligopoly market is in Nash equilibrium A) firms will not behave as profit maximizers. B) firms have colluded to set their prices. C) a firm will not take into account the strategies of its rivals. D) a firm will choose its best pricing strategy, given the strategies that it observes other firms have taken.

D) a firm will choose its best pricing strategy, given the strategies that it observes other firms have taken.

An equilibrium in a game in which players pursue their own self-interest is called A) a prisoner's dilemma. B) a Nash equilibrium. C) a coopera7ve equilibrium. D) a noncoopera7ve equilibrium.

D) a noncooperative equilibrium.

A characteristic found only in oligopolies is

D) interdependence of firms.

A game in which pursuing dominant strategies results in noncoopera<on that leaves all par<es worse off is a A) coopera7ve equilibrium. B) first-price auc7on. C) zero-sum game. D) prisoner's dilemma.

D) prisoner's dilemma.

In many business situations one firm will act first, and then the other firms will respond. To help analyze these types of situations economists use

a) sequential games

In a decision tree, the difference between a decision node and a terminal node is that

c) at a decision node, a decision must be made while a terminal node shows the payoff

which of the following is not part of an oligopolist's business strategy

meeting worker health and safety standards required of all firms