Economics 202 Chapter 8,9, 10
In traditional economic models, homo economicus is assumed to be all of the following except
altruistic **Homo economicus include- a satisficer, a behavioral economist, homo economicus**
A strategy that limits defection in a repeated prisoner's dilemma game is
A tit-for-tat strategy
A good is characterized by network economies if it
Becomes more valuable as more people own it
Patents, which confer market power, are intended to
Encourage innovation by helping firms recoup the costs of research and deve
One criticism of the present-aim standard of rationality is that it
can be used to virtually "explain" any bizarre behavior
Psychological incentives
can serve as commitment devices
A coalition of firms who agree to restrict output for the purpose of earning an economic profit is called a
cartel
In the realm of public policy, loss aversion makes it
difficult to enact policy changes
Impulse control problems arise when people
discount the future too heavily
Which of the following firms is most likely to be a pure monopolist?
The only gas station in a small, isolated town
The ____ is a game in which the first player has the power to confront the second player with a take-it-or-leave-it offer
Ultimatum bargaining game
In traditional economic models, which of the following does NOT describe homo economicus?
impulsive ** Well-informed, cognitively sophisticated, narrowly self-interested**
Government programs aimed at stimulating personal savings
increase welfare if people discount the future too heavily
If an entity if fungible, then its individual units are
interchangeable
If a natural monopoly decreases the quantity of output it produces, then
its average cost will increase
Given the demand curve it faces, if an imperfectly competitive firm wants to sell another unit of output, it must:
lower its prices
The reason economist consider monopoly to be socially undesirable is that monopolist
produce less than the socially optimal level of output
"Market Power" refers to a firms ability to
raise its price without losing all of its sales
___ is the phenomenon that unusual events are likely to be followed by more nearly normal ones.
regression to the mean
Judgemental and decision heuristics are
rule of thumb that reduce computation costs
Which of the following is NOT an example of a good with network economies?
A computer printer
If a firms total revenue is $112 when it sells 16 units, $119 when it sells 17 units and $126 when it sells 18 units,
A perfectly competitive firm
Emotions like guilt and sympathy
Can solve commitment problems
A credible promise is
In the promiser's interest to keep
A good with network economies
Internet service A cell pone Facebook
The monopolist will maximize profits at the output level for which
Marginal revenue equals marginal cost
The primary objective of an imperfectly competitive firm is to
Maximize profit
Industries in which firms have high fixed costs and low marginal costs are likely to have a
Small number of large firms
In sequential games, the player who moves first
Sometimes has an advantage and sometimes has a disadvantage
Game theory provides tools that are used to model:
Strategic interdependencies
A pure monopoly exist when
a single firm produces a good with no close substitutes
Traditional economic models assume that people care about
absolute consumption
According to the representative heuristic, If roger has many of the characteristics of a millionaire, then people will
be more likely to think that he is a millionaire
Evidence suggests that as the importance of what's at stake grows, loss aversion
becomes even more pronounced
A natural monopoly is a monopoly that arises from
economies of scale
A decision tree is used when modeling
games in which timing matters
Status quo bias is the
general resistance to change, often stemming from loss aversion
A monopolistically competitive firm is one
of many firms that sell products that are close but not perfect substitutes.
The use of psychological incentives to solve commitment problems would be least effective in games played
once between strangers
A purely self-interested diner is more likely to tip
only when dining in a restaurant at which he often eats
According to the textbook, the owners of restaurants encourage tipping in order to
solve a commitment problem with their wait staff
The three elements of a game are
the players, the strategies and the payoffs