Micro Economics Midterm #4
Q20. Refer to the figure above. What does the region ABDC indicate? A. economic profit B. loss incurred by the producer C. consumer surplus D. deadweight loss
A
Q21. Suppose a monopolistic competitor produces 2,000 units of the good in equilibrium and charges a price of $10 for each unit. If the average total cost of producing 2,000 units of the good is $6, what is the total profit earned by the producer? A. $8,000 B. $4000 C. $2000 D. $20,000
A
Q3. A ____ is a complete plan describing how a player will act. A. strategy B. payoff C. hypothesis D. policy
A
When compared to a perfectly competitive industry, in a monopoly: A. consumer surplus is lower B. consumer surplus is higher but social surplus is smaller C. both consumer surplus and social surplus are smaller D. both consumer surplus and social surplus are larger
C
Which of the following is true of a payoff matrix? A. it shows the payment made to each factor of production for the production of a good B. it does not represent all the costs and benefits associated with the choices of the players C. it takes into account all relevant costs and benefits associated with each action of the players D. it is the representation of only the best response of each player
C
*Q20. The pricing rule for a monopolist is: A. P = MR > MC B. P > MR > MC C.P = MR = MC D. P > MR = MC
D
Q4. In comparison to firms in other market structures, monopolists: A. maximize social surplus B. encourage the entry and exit of new firms C. set price lower than marginal revenue D. produce goods that do not have close substitutes
D
Which of the following best describes network externalities? A. they are the benefits received by other firms from the actions taken by a monopolist B. they occur when a firm hires an outside company to help lower its costs. C. they are the benefits to a firm from increasing its online presence D. they occur when a product's value increases as more consumers begin to use it.
D
(Figure Question) Suppose there are cable TV companies in your city, Astounding Cable and Broadcast Cable. They both must decide on a high advertising budget, a moderate advertising budget, or a low advertising budget. They will make their decisions simultaneously. Their payoffs are as follows: Astounding's dominant strategy is Medium, and Broadcast's dominant strategy is No dominant strategy. The equilibrium is __________. A. medium/medium B. low/low C. high/high D. high/low
A
(Figure Question) It is possible for two-player games to be quite asymmetric: each player might have a different set of options, and the payoffs may be quite different. Consider the following example between a large firm and a small firm. The first number in each box denotes the large firm's payoff, and the second number shows the small firm's payoff. Given this information, which of the following is true of this game? A. neither of the firms has a dominant strategy B. large firm has a dominant strategy C. small firm has a dominant strategy D. none of the above
A
(Scenario Question) Scenario: Jack and Jill have gone out for cycling and they have come to a place where the road is obstructed by a fallen tree. They can move the tree if both of them try. If neither of them tries, they have to turn back and reach home very late. However, if one of them tries while the other does not help, the one who tries will have a muscle sprain and will not be able to move the tree. The matrix below shows the utility each of them derives in each situation. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Jack will derive __ units of utility if both of them try to move the tree. A. 5 B. -2 C. -5 D. 10
A
(Scenario Question) Scenario: Two factories dump their waste in a river. This has led to the contamination of the water which is also used in the production process. The matrix below shows the profits of the two firms based on their respective decisions to dump their waste into the river. Note that each firm's choice affects the other firm's profit. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Collectively, the firms will be better off if: A. neither of the firms dumps its waste into the river B. firm 2 chooses to dump its waste into the river while Firm 1 chooses not to dump its waste C. both firms choose to dump their waste into the river D. firm 1 chooses to dump its waste into the river while firm 2 chooses not to dump its waste
A
(Scenario and figure question) Scenario: Two factories dump their waste in a river. This has led to the contamination of the water which is also used in the production process. The matrix below shows the profits of the two firms based on their respective decisions to dump their waste into the river. Note that each firm's choice affects the other firm's profit. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. This game ____. A. has a dominant strategy equilibrium B. does not have a dominant strategy equilibrium C. does not have a Nash equilibrium D. has multiple Nash equilibria
A
(scenario question) Which of the following is likely to happen if Mike confesses while Rita does not confess? A. Mike will be let free while Rita will be suspended B. both of them will be let free C. 10 points will be deducted from their respective scores D. 10 points will be deducted from Rita's scores while Mike will be suspended
A
(scenario question) Which of the following is likely to happen if Rita confesses while Mike does not confess? A. rita will be let free while Mike will be suspended B. 10 points will be deducted from their respective scores C. 10 points will be deducted from their respective scores D. both of them will be let free
A
**(Scenario Question) Scenario: Two friends have settled on a unique strategy to decide who will complete his homework first and help the other. They have agreed to simultaneously make one of the three symbols with their fists - a rock, a paper, or scissors. Simple rules of "rock breaks scissors, scissors cut paper, and paper covers rock" dictate which symbol beats the other. If both of them hold out the same symbols, the game is a tie. Refer to the scenario above. This is an example of a(n) ________. A. zero-sum game B. prisoners' dilemma C. extensive-form game D. variable-sum game
A
**Q 28. (Scenario Question: What is the equilibrium outcome in this case? A. Both firms will dump their waste into the river. B. Neither of the firms will dump its waste into the river. C. Firm 1 will dump its waste into the river, while Firm 2 will not dump its waste. D. Firm 2 will dump its waste into the river, while Firm 1 will not dump its waste.)
A
**Q11. In an oligopoly with differentiated products, firms _____. A. make positive economic profits B. incur losses C. earn zero economic profits D. do not face competition from its rivals
A
**Q13. (Figure Question: For firm A A. setting a low price is the dominant strategy B. setting a high price is the dominant strategy C. there is no dominant strategy D. doing the opposite of firm A is always the best strategy
A
**Suppose there are five firms in an industry. Their sales (that is, total revenue) are as follows: Firm 1: 98 million Firm 2: 46 million Firm 3: 46 million Firm 4: 14 million Firm 5: 6 million The Herfindahl-Hirschman Index (HHI) for this industry is (Enter your response as an integer.) A. 3,312 B. 2,312 C. 5,312 D. 4,312
A
**The graph on the right represents the demand, marginal revenue, and marginal cost curves for a monopoly. What price should this monopolist charge to maximize profits? A. $5.00 B. $4.50 C. $2.00 D. $4.00
A
*Q11. A network externality refers to a situation where: A. the value of a product increases as more consumers start to use it B. firms collude to sell products at a price higher than the equilibrium price C. a firm that has control over key resources auctions the resources off to other firms D. the government interferes to prevent the concentration of market power in the hands of a few firms
A
*Q12. Which of the following statements is true? A. Network effects act as barriers to entry in a market B. Economies of scale act as incentives for new firms to enter a market C. If a firm is enjoying economies of scale, then its products must have network effects D. if a firm's product has network effects, then the firm must be enjoying economies of scale
A
*Q7. Greenaqua Corp. was given the exclusive right to produce and sell its newly introduced water purifier for 20 years. The right granted to Greenaqua is an example of a: A. patent B. blueprint C. copyright D. trademark
A
A best response is ___. A. one player's optimal action choice taking the other player's action as given B. an action choice that always results in a zero payoff to the opponent C. an action choice that results in equal payoffs to all the players in a game D. one player's optimal action choice irrespective of the action of the other player
A
At a certain level of production, the marginal revenue and marginal cost of a monopolist are $8 and $6, respectively. Which of the following statements is true in this context? A. the monopolist should expand production b. the profits of the monopolist are minimized C. the profits of the monopolist are maximized D. the monopolist should contract production
A
Based on the graph we know that ____. A. You prefer P1, but the tech firm prefers P2 B. you both prefer the price of P1 C. you both prefer the price of P2 D. you prefer P2, but the tech firm prefers P1
A
Both monopolies and monopolistically competitive firms set marginal revenue equal to marginal cost to maximize profit. Given the same cost curves, would you expect prices to be higher in a monopoly or a monopolistically competitive market? A. monopoly, because its demand is more inelastic B. monopoly, because consumers are more sensitive to price C. monopolistically competitive market because demand is greater D. monopoly, because it is a price taker
A
In recent years, some online firms have offered different consumers different prices for the same good. These firms use the consumer's IP address to find what city they are in and then charge a higher price to people in wealthier cities. This type of pricing behavior is ____ A. third-degree price discrimination B. first-degree price discrimination C. location discrimination D. second-degree price discrimination
A
Q 10. (Scenario Question: In this game, the ___ strategy combination gives strictly lower payoffs than the ___ strategy combination. A. Confess, confess; do not confess, do not confess B. confess, do not confess; do not confess, confess C. do not confess, do not confess; confess, confess D. do not confess, confess; confess, do not confess
A
Q1. Goods that are similar but are not perfect substitutes are called ___ goods. A. differentiated B. homogeneous C. normal D. inferior
A
Q14. A Nash equilibrium occurs if ___ A. each player chooses strategies that are mutual best responses B. each player chooses his or her dominant strategy C. each player chooses only a pure strategy D. each player chooses only a mixed strategy
A
Q19. At a certain level of production, the marginal revenue and marginal cost of a monopolist are $8 and $6 respectively. Which of the following statements is true in this context? A. the monopolist should expand production B. the monopolist should contract production C. the profits of the monopolist are maximized D. the profits of the monopolist are minimized
A
Q29. A firm is said to have market power if it charges a price ______ of production. A. higher than the marginal cost B. lower than the marginal cost C. equal to the marginal cost D. equal to the average fixed cost
A
Q32. (Scenario Question: in equilibrium, ____ A. both firms will offer a discount B. neither of the firms will offer a discount C. Firm 1 will offer a discount while Firm 2 will not offer a discount D. Firm 1 will continue charging the original price while Firm 2 will offer a discount)
A
Q35. (scenario question: in equilibrium, beth's payoff is ___ to win this game. A. $10 B. $0 C. $20 D. $50)
A
Q4. Which of the following markets is an example of an oligopoly? A. the market for premium apparels B. the market for books C. the market for video games D. the market for wheat
A
Q5. A game is called a simultaneous move game if ___. A. players choose their actions at the same time B. one player chooses her action after the other player makes a move C. players choose mixed strategies to play the game D. players choose their dominant strategies to play the game
A
Q8. There are two firms in an industry and their products are perfect substitutes for each other. Each firm had a market share of 50% and charged equal prices. However, when the demand for the good declined due to a recession, Firm A lowered its price to increase sales. Firm B responded by lowering its price further. This is an example of the ____ of oligopoly A. Bertrand model B. cournot C. ricardian D. keynesian
A
Q9. In a duopoly with homogeneous products, the best response of a firm is to charge a lower price than its rival as long as ____. A. the rival's price is above marginal cost B. the rival's price is below marginal cost C. the rival's price is above average cost D. the rival's price is below average cost
A
Scenario: When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. Refer to the scenario above. What is the change in total revenue due to the price reduction? A. the total revenue increases by $50 B. the total revenue decreases by $175 C. the total revenue decreases by $105 D. the total revenue increases by $25
A
Seller A increases the price of its good by 20% and still enjoys a high market demand. Due to the high demand, there is an increase in the number of similar sellers in the long-run. Which of the following is not a common characteristic between a monopoly and monopolistic competition? A. the products sold have close substitutes B. the price set by the seller/producer will be above marginal revenue C. the slope of the demand curve is negative D. there is deadweight loss in the market
A
Seller A increases the price of its good by 20% and still enjoys a high market demand. Due to the high demand, there is an increase in the number of similar sellers in the long-run. This is an example of monopolistic competition. Which of the following is not a common characteristic between a monopoly and monopolistic competition? A. the products sold have close substitutes B. there is deadweight loss in the market C. the slope of the demand curve is negative D. the price set by the seller/producer will be above marginal revenue
A
Sirius XM Satellite Radio and XM Satellite Radio were the only two satellite radio providers in the United States. The Department of Justice (DOJ) and the Federal Communications Commission (FCC) approved the merger of the two companies in 2008 even though Sirius-XM would then control 100 percent of the satellite radio market. Which of the following arguments do you think Sirius and XM used to convince the DOJ and the FCC to allow the merger to proceed? A. There are many close substitutes for satelliteradio; therefore, Sirius-XM would not exercise market power. B. By stopping themerger, it would have limited the amount of variety on the radio, thereby limiting free speech. C. Compared to the price of acar, the satellite radio subscription was too small a part of the consumer budget to matter. D. Satellite radio is most often used in cars and neither firm had any pricing power in the car market.
A
Suppose you were playing rock-paper-scissors as an extensive from game; first you choose rock, or paper, or scissors, and then your opponent makes a choice. Is there a first-mover advantage in this game? A. no, if you show your move first you will lose every time B. yes, first mover has an advantage by getting to pick their first choice C. yes, first mover wins in this game D. no, first mover must play a dominant strategy which is good for mixed strategy games
A
The price chosen by a monopolist: A. is independent of the production of other firms B. maximizes social surplus C. is dependent on the production of other firms D. maximizes consumer surplus
A
Tobacco companies have often argued that they advertise to attract more existing smokers and not to persuade more people to smoke. Suppose there were just two cigarette manufacturers, Jones and Smith. Each can either advertise or not advertise. If neither advertises, they each capture 50 percent of the market and each earns $10 million. If they both advertise, they again split the market evenly, but each spends $2million on ads and so each earns just $8million (remember, advertising is not supposed to encourage more people to smoke). If one company advertises but the other does not, then the company that advertises attracts many of its rival's customers. As a result, the company that advertises earns $12 million and the company that does not earns just $6 million. What is each firm's dominant strategy? A. both firms' dominant strategy is to advertise B. smith's dominant strategy is to not advertise and Jones's dominant strategy is to advertise C. both firms' dominant strategy is to not advertise D. smith's dominant strategy is to advertise and Jones's dominant strategy is to not advertise
A
Which of the following market structures provides socially efficient outcomes? A. perfect competition B. monopolistic competition C. oligopoly D. monopoly
A
(Scenario Question w/ figure) Scenario: Two factories dump their waste in a river. This has led to the contamination of the water which is also used in the production process. The matrix below shows the profits of the two firms based on their respective decisions to dump their waste into the river. Note that each firm's choice affects the other firm's profit. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. What is the equilibrium outcome in this case? A. firm 1 will dump its waste into the river, while firm 2 will not dump its waste B. both firms will dump their waste into the river C. neither of the firms will dump its waste into the river D. firm 2 will dump its waste into the river, while firm 1 will not dump its waste
B
(Scenario Question) Scenario: Two friends are playing a game. The rules of the game are simple. Each player is given a bag containing a white ball and a black ball, and the two are asked to simultaneously draw one ball each. They are informed about their payoffs just before the game begins, which are shown in the matrix below. The first number listed in each cell is the payoff to the row player, and the second number listed is the payoff to the column player. Which of the following is true? A. there is no nash equilibrium in this game B. Player 1 should draw a black ball if he expects Player 2 to draw a white ball C. nash equilibrium occurs if Player 2 draws a black ball while Player 1 draws a black ball D. nash equilibrium occurs if both the players draw white balls
B
**Q1. Game theory is the study of __ A. policy analysis B. strategic interactions C. program evaluation D. irrational decision making
B
**Q12. (Figure Question: For firm B A. setting a high price is the dominant strategy B. setting a low price is the dominant strategy C. there is no dominant strategy D. doing the opposite of firm A is always the best strategy)
B
**Q12. Which of the following is true of a duopoly with differentiated products? A. a firm loses all its customers when its rival lowers the price of its product B. a firm does not lose all its customers when its rival lowers the price of its product C. a firm faces a perfectly elastic demand curve D. a firm faces a perfectly inelastic demand curve
B
**Q18. A profit-maximizing monopolistic competitor continues production until _____. A. marginal revenue exceeds marginal cost B. marginal revenue equals marginal cost C. marginal revenue exceeds average revenue D. marginal revenue equals average revenue
B
**Q25. In a small isolated town, there are two types of people, saints and crooks. In businessdealings between any two residents of this town, the payoffs are below. Note that the buyerchoose the rows and seller choose the columns. Which of the following strategies are Nashequilibria? A. (saint, saint) B. (saint, crook) C. (crook, crook) D. none are Nash equilibria
B
**Q27. Refer to the scenario above. A firm producing Good Y will continue production in the short run if total revenue exceeds ___. A. $25,000 B. $60,000 C. $85,000 D. $35,000
B
**Q30. The quantity produced in a monopolistically competitive market is ____ than the quantity produced in a perfectly competitive market, and the price charged in a monopolistically competitive market is ___ than the price charged in a perfectly competitive market. A. higher; higher B. lower; higher C. higher; lower D. lower; lower
B
**Q32. The Herfindahl-Hirschman Index is calculated by ______. A. adding the market share of each firm in the market and squaring the resulting number B. squaring the market share of each firm competing in the market and then summing the resulting numbers C. adding the number of firms in the market and squaring the resulting number D. adding the profit earned by each firm in the market
B
**Q33. (Scenario Question: This is an example of a(n) __ A. zero-sum game B. extensive-form game C. free-rider problem D. tragedy of commons)
B
**Q35. Which of the following is a similarity between a monopoly and an oligopoly with differentiated products? A. there are no barriers to entry in both markets B. the long-run equilibrium price in both markets exceeds marginal cost C. there is a single seller in both markets D. firms in both the markets earn zero profit in the long run
B
**Which of the following statements is true of monopolistic competition and perfect competition? A. perfect competition is a special case of monopolistic competition, which occurs when demand is perfectly inelastic B. perfect competition is a special case of monopolistic competition, which occurs when demand is perfectly elastic C. perfect competition is a special case of monopolistic competition, except firms in monopolistic competition can earn profits in the long run D. perfect competition and monopolistic competition are completely unrelated
B
*Q9. If a monopolist owns or controls a key resource necessary for production, it is a source of: A. legal market power B. natural market power C. regulated market power D. restricted market power
B
A consumer stops to buy an ice cream from Gene's Ice Cream Stand who charges $2 more per ice cream than the general market price of similar ice cream stands. All of the ice cream stands incur the same costs. However, the quantity of ice cream supplied by Gene's Ice Cream Stand is exhausted for the day. Based on the given scenario, which of the following statements is not true about Gene's Ice Cream Stand? A. the quantity produced is less than the socially efficient production level causing it to create a deadweight loss B. the quantity produced was at the minimum of the average total cost curve C. the price charged is above the marginal cost D. the quantity produced is limited to earn higher economic profits
B
An industry is deemed concentrated when ____. A. most of the firms in that industry earn zero economic profits in the long run B. a few firms account for a large fraction of total sales in that industry C. all the firms in that industry charge a price lower than the average cost of production D. each firm in that industry has a small market share
B
Average total cost decreases with an increase in output because: A. diminishing marginal returns sets in after a particular level of production B. the average fixed cost decreases with an increase in output C. the marginal cost of production increases with an increase in output D. the total variable cost decreases with an increase in output
B
A first-mover advantage occurs if __________. A. the first mover to act in a strategic game reaches the Nash equilibrium B. the first mover to act in a sequential game gets a benefit from doing so C. the first mover to act in a sequential game reaches the dominant strategy equilibrium D. the first mover to act in a strategic game reaches the dominant strategy equilibrium
B
Everything else remaining unchanged, if a new seller enters a market to compete with an existing monopoly that is enjoying economies of scale, it will lead to: A. higher market power for the existing firm B. lower profits for the existing firm C. higher profits for both firms D. higher profits for the existing firm
B
How are the products sold by a monopolistically competitive firm different from the products sold in a competitive market? Unlike products sold in a competitive market, the products sold in a monopolistically competitive market are ___________. A. expensive B. differentiated C. homogenous D. perfect substitutes
B
If a monopolist owns or controls a key resource necessary for production, it is a source of: A. regulated market power B. natural market power C. legal market power D. restricted market power
B
In a zero-sum game, ___. A. each player has a dominant strategy B. one player's loss is another player's gain C. each player chooses a pure strategy D. each player earns a zero payoff irrespective of the strategy one chooses
B
Q10. Economies of scale in production act as a source of: A. legal market power B.natural market power C. restricted market power D. regulated market power
B
Q11. Which of the following statements is true? A. in any game, the best response of a player is also her dominant strategy B. the best response of a player is not always her dominant strategy C. a prisoners' dilemma game is an example of a zero-sum game. D. a prisoners' dilemma game is an example of an extensive-form game.
B
Q14. A collusion breaks down if ____. A. a firm charges a price higher than the price set by the other colluding firms B. a firm charges a price lower than the price set by the other colluding firms C. the price set by the colluding firms equals the marginal cost of production D. the price set by the colluding firms exceeds the marginal cost of production
B
Q15. An oligopoly model in which sellers compete on quantities rather than prices is called a ___ model. A. bertrand B. cournot C. ricardian D. keynesian
B
Q15. Which of the following is true of a Nash Equilibrium? A. a game can have only one nash equilibrium B. no player can improve his payoff by changing his strategy once in Nash equilibrium C. a nash equilibrium can't occur if each player is aware of the strategies of other players D. a nash equilibrium occurs if each player earns a zero payoff irrespective of the strategy he chooses
B
Q17. When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product What is the change in total revenue due to the price reduction? A. the total revenue increases by $25 B. the total revenue increases by $50 C. the total revenue decreases by $105 D. The total revenue decreases by $175
B
Q18. When a monopolist sells positive levels of output, its demand curve: A. lies below its marginal revenue curve B. lies above its marginal revenue curve C. and marginal revenue overlap D. is vertical while its marginal revenue curve is horizontal
B
Q19. A monopolistically competitive firm makes positive economic profits if ___. A. price is less than average total cost B. price is higher than average total cost C. price equals marginal cost D. price equals average fixed cost
B
Q22. A monopolistically competitive firm shuts down in the short run if _______. A. marginal revenue equals marginal cost B. total revenues do not cover variable costs C. marginal revenue covers average fixed costs D. average total cost exceeds price
B
Q22. Alec and Kim used to be much better friends than they are now. The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is given below. Which of the following strategies are Nash equilibria? A. to buy a gift for Alec B. not to buy a gift for Alec C. indifferent D. both B and C
B
Q23. Suppose in Q22 payoff matrix, Alec commits at Thanksgiving time to buy a gift forKim, Kim will find it in her best interest A. to buy a gift for Alec B. not to buy a gift for Alec C. indifferent D. both B and C
B
Q24. Refer to the scenario above. Which of the following will happen if the equilibrium price charged by the firm in the short run is $130? A. the firm will earn positive economic profits and continue production B. the firm will incur a loss but continue production C. new firms will enter the industry in the long run D. all firms will incur losses in the long run
B
Q27. Suppose AMD is considering cloning Intels latest CPU chip. If AMD enters Intelsmarket, Intel can play Mean, expand its output, drop prices, and try to make AMDs profit assmall as possible or play Nice by cutting back its output and sharing the market. AMD andIntel both know that after all moves are complete, the time-discounted profits of future chipproduction in billions of dollars are given below. Which of the following strategies are Nashequilibria? A. (Out, Mean) B. (In, Nice) C. (In, Mean) D. (Out, Nice)
B
Q28. A monopolistic competitor exits the industry in the long run if ___. A. total revenue exceeds total cost B. total cost exceeds total revenue C. marginal revenue exceeds marginal cost D. marginal revenue equals marginal cost
B
Q3. Sellers in which of the following market structures are likely to have the highest market power? A. oligopoly B. monopoly C. perfect competition D. monopolistic competition
B
Q31. (Scenario Question: Which of the following is true? A. Firm 2 should never offer a discount. B. Firm 2 should offer a discount if Firm 1 offers a discount. C. Both firms should offer a discount. D. Firm 1 should never choose to offer a discount.)
B
Q31. The Herfindahl-Hirschman Index is used to ____. A. measure the price elasticity of demand faced by a firm B. estimate the degree of competitiion in an industry C. measure the price elasticity of market supply in an industry D. estimate the profit earned by firms in an industry
B
Q4. Which of the following is true of a payoff matrix? A. it is the representation of only the best responses of each player B. it takes into account all relevant costs and benefits associated with each action of the players C. it shows the payment made to each factor of production for the production of a good D. it does not represent all the costs and benefits associated with the choices of the players
B
Q5. _____ is the market structure in which there are many rival firms producing differentiated products. A. perfect competition B. monopolistic competition C. monopoly D. oligopoly
B
Q6. A ____ is the privilege granted to an individual or company by the government, which gives them the sole right to produce and sell a good. A. brand B. patent C. copyright D. trademark
B
Q6. A best response is ____. A. one player's optimal action irrespective of the action of the other player B. one player's optimal action choice taking the other player's action as given C. an action choice that always results in a zero payoff to the opponent D. an action choice that results in equal payoffs to all the players in a game
B
Q7. (Scenario question: This is an example of a(n) ____. A. extensive-form game B. simultaneous-move game C. zero-sum game D. mixed strategy game)
B
Scenario: When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. Refer to the scenario above. What is the price effect of the price change? A. $100 B. $250 C. $50 D. $75
B
Some economists believe the threat of unfair monopolies is greater today than when the Sherman Act was first enacted. They argue that modern software can gain monopoly status and establish a barrier to entry through ____________. A. greater costs in applying for patents and copyrights B. network externalities C. increased access to venture capital money D. the ability to raise money from the stock market
B
Suppose the government grants an individual or company the exclusive right to intellectual property. In this case, the government is granting a copyright. Which of the following is NOT likely covered by a copyright? A. a new song B. a photocopier C. a work of art D. a photograph
B
Use a matrix to model a two-player game of rock-paper-scissors with a payoff of 1 if you win, -1 if you lose, and 0 if you tie. Construct the payoff matrix for this game. Why should you use a mixed strategy to play this game? A. pure strategy is a more efficient way to reach higher payoff outcomes B. predictable behavior by one player can be taken advantage of by the other player C. mixed strategy has the advantage of requiring less effort to generate an optimal outcome D. random behavior generally leads to a Nash equilibrium
B
Which of the following best describes the relationship between price, marginal revenue, and TR for a monopolist? A. when MR is rising, TR is rising, and when MR is falling, TR is falling B. When MR is positive, TR is rising, and when MR is negative, TR is falling C. As MR falls, TR rises D. They are all equal for a monopolist
B
Which of the following is an example of a good produced under perfect competition? A. bottled water B. corn C. patented software D. cars
B
Which of the following is true of a Nash equilibrium? A. a game can have only one Nash equilibrium b. no player can improve his payoff by changing his strategy once in Nash equilibrium C. a nash equilibrium can't occur if each player is aware of the strategies of other players D. a nash equilibrium occurs if each player earns a zero payoff irrespective of the strategy he chooses
B
Which of the following statements is true? A. a natural monopoly earns higher profits than a monopolastically competitive firm because it faces a horizontal market demand curve B. an increase in consumer demand can change a natural monopoly into a multi-seller market C. a natural monopoly earns higher profits than a monopolistically competitive firm because it faces an upward sloping market demand curve D. a natural monopoly always arises from government intervention in the market
B
Which of the following statements is true? A. a perfectly competitive firm is a price maker because it faces a downward sloping demand curve B. a monopoly is a price maker because it faces a downward sloping demand curve. C. a perfectly competitive firm is a price taker because it faces a downward sloping demand curve D. a monopoly is a price taker because it faces a downward sloping demand curve
B
which of the following statements correctly identifies a similarity between monopoly and perfect competition? A. firms face an upward sloping demand curve and a downward sloping marginal revenue curve in both the market structures B. production is expanded until marginal revenue equals marginal cost in both the market structures C. entry is restricted in both market structures D. price equals marginal cost in both market structures
B
(Figure Question) Suppose Russia is deciding to Invade or Not Invade its neighbor Ukraine. The United States has to decide to be Tough or Make Concessions. They will make their decisions simultaneously. Their payoffs are as follows: The Nash equilibrium is ____________. A. make concessions/invade B. make concessions/not invade C. tough/not invade D. tough/invade
C
(Figure question) Consider a game with two players, Bill and Larry. They play the game as summarized in the game tree below. Suppose Bill initially has a secure monopoly in the market for computer operating systems. When there is no threat of entry, Bill charges the maximum monopoly price. Then Bill discovers that a second software firm run by Larry is thinking about entering the market. Since his monopoly is now insecure, Bill has two options: he can continue to act as a monopolist and allow the second software firm to enter the market, or he can try to prevent the other firm from entering the market by producing a greater quantity at a lower cost. This is an example of: A. a fishbone game B. a simultaneous game C. an extensive game D. a monopoly game
C
(Figure question: what is the profit-maximizing quantity that the monopolist should produce if it faces a constant marginal cost of $3?) A. 400 units B. 200 units C. 300 units D. 600 units
C
(Scenario Question) Scenario: Rita and Mike have been caught cheating on an examination. They are taken to separate rooms for interrogation. Their payoff matrix is given below. The first outcome listed in each cell is the payoff to the row player and the second outcome listed is the payoff to the column player Which of the following is true? A. rita's best response is to hold out if she expects Mike not to confess B. Rita's best response is not to confess irrespective of what Mike does C. Mike's best response is to confess irrespective of what Rita does D. Mike's best response is to hold out if Rita confesses
C
(Scenario Question) Scenario: Two firms in a market sell identical goods and charge a price of $5 per unit. However, the cost of a crucial input used in producing these goods has increased. As a result, both of the firms are considering increasing the price of the good to $6. If the firms do not raise their prices at the same time, the firm that raises the price stands to lose market share. The payoff matrix shows their respective payoffs on the basis of the prices charged by each. Here, payoffs denote the number of units sold by each firm. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Which of the following is true in this case? A. this game does not have a dominant strategy B. Firm 1's dominant strategy is to charge $6 C. Firm 1's dominant strategy is to charge $5 D. Firm 2's dominant strategy is to charge $6
C
(Scenario Question) What will the outcome of this game be? A. rita will confess while Mike will not confess B. neither of them will confess C. Both of them will confess D. Mike will confess while Rita will not confess
C
(Scenario Question) Which of the following is a winning strategy for this game? A. a strategy to always show a paper B. a strategy to always show a scissor C. a random mix of all the three symbols D. a strategy to always show a rock
C
(Scenario Question) Which of the following is true? A. a nash equilibrium occurs if Firm 1 charges a price of $5 and firm 2 charges a price of $6 B. this game does not have a nash equilibrium C. the dominant strategy equilibrium is the nash equilibrium D. a nash equilibrium occurs if firm 1 charges $6 and firm 2 charges $5
C
(Scenario Question) Jack will derive ____ units of utility if he tries to move the tree while Jill does not try at all. A. -2 B. 10 C. 5 D. -5
C
**(Consider the following graphs) Which of the graphs above, that does not actually show perfect competition, is closest to perfect competition in terms of the price and quantity? A. graph A B. None C. Graph B D. Graph C
C
**(Scenario Question) Scenario: The payoff matrix given below shows the payoffs to two firms in millions of US dollars for choosing two alternative strategies. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. A. this game has multiple Nash equilibria B. the dominant strategy equilibrium of this game is not Pareto efficient C. the dominant strategy equilibrium of this game is also the Nash equilibrium D. this game does not have a Nash equilibrium
C
***Q24. Alec and Kim used to be much better friends than they are now. The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is given below. If Alec commits at Thanksgiving time to buy a gift for Kim, Kim will find it in her best interest. A. to buy a gift for alec B. not to buy a gift for Alec C. indifferent D. both B and C
C
**Q16. (Figure Question: The firms must choose between a high advertising budget and a low advertising budget. Firm B's dominant strategy A. does not exist B. is to copy firm A C. is to select a high advertising budget D. to select a low advertising budget)
C
**Q17. (Figure Question: A nash equilibrium is that A. firm A selects a high advertising budget and firm B selects a low advertising budget B. firm A selects a low advertising budget and firm B selects a high advertising budget C. both firms select a high advertising budget D. both firms select a low advertising budget
C
**Q2. Which of the following is likely to use the concepts of game theory? A. deciding on how much to spend on monthly groceries B. exit decision of competitive firms in the long run C. international trade negotiation D. pricing decision of a firm operating in a competitive market
C
**Q23. refer to the scenario above. If the market for Good Y is monopolistically competitive, a firm producing Good Y will shut down production in the short run if price falls below ___. A. $60 B. $200 c. $120 D. $50
C
**Q26. In a small isolated town, there are two types of people, saints and crooks. In businessdealings between any two residents of this town, the payoffs are below. Note that the buyerchoose the rows and seller choose the columns. Which of the following strategies are Nashequilibria? A. (Saint, Saint) B. (Saint, Crook) C. (Crook, Crook) D. None are Nash equilibria
C
**Q34. (scenario question: beth should use __ to win this game. A. mixed strategy B. forward induction C. backward induction D. her dominant strategy)
C
**Q36. (Scenario question: If this game is repeated several times, Beth will __ and Charles will __. A. not trust; defect B. trust; defect C. trust; cooperate D. not trust; cooperate)
C
**Q6. Which of the following is an example of a monopolistically competitive market? A. the market for wheat B. the market for coffee beans C. the market for shampoo D. the market for premium cars
C
**The DOJ filed a lawsuit against Microsoft claiming it was engaging in unfair practices by ___. A. keeping the software code behind its operating system secret from users and competitors B. producing less than the efficient amount of its operating system and charging above the market price C. monopolizing the market by bundling its operating system with its Internet Exploring browser D. selling its operating system at different prices to different people based on consumer characteristics
C
*Q14. Which of the following statements is true? A. a monopolist faces an upward sloping demand curve B. a perfectly competitive firm faces an upward sloping demand curve C. a monopolist can increase the price of its products and not lose all of its business D. a perfectly competitive firm can increase the price of its product without losing its business
C
A monopolist faces an average total cost of $6 when it produces 200 units of its product. If it sells the 200 units at $8/unit, ___. A. the monopolist makes a profit of $200 B. the monopolist incurs a loss of $400 C. the monopolist makes a profit of $400 D. the monopolist incurs a loss of $200
C
A nash equilibrium occurs if ___. A. each player chooses only a pure strategy B. each player chooses only a mixed strategy C. each player chooses strategies that are mutual best responses D. each player chooses his or her dominant strategy
C
A pure strategy involves ___. A. choosing ethical actions over Nash strategies B. choosing ethical actions over dominant strategies C. choosing one particular action for a situation D. choosing different actions randomly
C
A strategy is called a mixed strategy if it involves choosing ____. A. an action that yields a higher payoff to the opponent B. one particular action for a situation C. different actions randomly D. an action that yields zero payoff to the player
C
Consider four market structures: perfect competition, monopolistic competition, oligopoly, and monopoly. Firms in all four market structures maximize profits by producing the quantity where ___________. A. price equals marginal revenue B. marginal cost equals zero C. marginal revenue equals marginal cost D. price equals marginal cost
C
Consider the market for college textbooks. Assume this market is monopolistically competitive. A representative firm's demand (D), marginal revenue (MR), marginal cost (MC), and average cost (AC) curves are illustrated in the figure on the right. This industry ____. A. is not in long-run equilibrium because firms are breaking even, which will result in firms exiting B. is in long-run equilibrium because firms are breaking even C. is not in long-run equilibrium because firms are incurring losses, which will result in firms exiting D. is not in long-run equilibrium because firms are incurring losses, which will result in firms entering
C
Firms A and B plan to collude in an economy for their similar products, which includes the grim strategy for punishment. They plan to set the price of their product at $8. The marginal cost of Firm A is $5 and Firm B is $4.50. If firm A is impatient to earn more profits and Firm B wishes to last in the business for the long-run, which of the following situations would likely occur? A. firm A reduces hte price to $7 causing Firm B to exit the market B. firm b reduces the price to $7 causing firm A to exit the market C. firm A reduces the price to $7 causing firm b to reduce its price to $4.50 D. firm b reduces the price to $7 causing firm A to reduce its price to $7
C
In a game with mixed strategies, does either of the players have a dominant strategy? Why or why not? A. yes, because dominant strategies involve picking random strategies B. no, because dominant strategies involve picking random strategies C. no, because the best choice in a mixed strategy game is to pick a random strategy D. yes, because the best choice in a mixed strategy game is to pick a random strategy
C
Q1. Compared to a firm under perfect competition, a monopolist: A. charges less and produces less B. charges less and produces more C. charges more and produces less D. charges more and produces more
C
Q10. La Dila and Swiss Pro are the only two firms in an industry. The firms initially charge equal prices for their products, which are perfect substitutes. What happens if La Dila decides to lower its price slightly? A. La Dila will lose all its market share B. Swiss Pro will gain market share C. La Dila will face the entire market demand D. Swiss Pro will earn positive economic profits
C
Q13. There are a few firms in the automobile industry in Portland. In order to prevent a price war, these firms secretly agreed to charge a price 20% above the marginal cost of production. This is an example of ____.
C
Q2. The effect of the invisible hand is likely to be the strongest under which market structure? A. oligopoly B. monopoly C. perfect competition D. monopolistic competition
C
Q25. Refer to the scenario above. If the equilibrium price charged by the firm in the short run is $170, the firm will earn ____. A. a profit of $10/unit B. a profit of $25/unit C. a profit of $0/unit D. a profit of $30/unit
C
Q26. Refer to the scenario above. A firm producing Goody Y will ___. A. earn economic profits if it charges a price of 120 B. incur losses if it charges a price of $200 C. earn zero economic profits if it charges a price of $170 D. shut down production if price falls below $200
C
Q33. There are four firms in the cement industry in richland. Firm a has a market share of 30%, firm b has a market share of 20%, firm c has a market share of 25%, and firm d has a market share of 25%. The herfindahl-hirschman index for the cement industry is ____. A. 50 B. 100 C. 2,550 D. 4,000
C
Q8. A musician was guaranteed by the government that no one else could replicate or sell his music CDs. This is an example of a: A. patent B. blueprint C. copyright D. trademark
C
Which of the following equations calculates economic profits for a monopoly? A. profits = P x Q B. Profits = P + ATC/Q C. Profits = (P-ATC) x Q D. Profits = ATC x Q
C
Which of the following is NOT a characteristic of monopoly? A. market power B. a single seller C. Produces identical goods D. Price-maker
C
Which of the following statements correctly differentiates between a monopoly and a perfectly competitive firm? A. a perfectly competitive firm faces a horizontal demand curve, whereas a monopoly faces an upward sloping demand curve B. a perfectly competitive firm faces an upward sloping demand curve whereas a monopoly faces a horizontal demand curve C. a perfectly competitive firm sets its product price at its marginal cost, whereas a monopoly sets the price above its marginal cost. D. a perfectly competitive firm sets its product price above its marginal cost, whereas a monopoly sets its product price equal to its marginal cost
C
Which of the following statements is true? A. a prisoners' dilemma game is an example of an extensive-form game B. a prisoners' dilemma game is an example of a zero-sum game C. the best response of a player is not always her dominant strategy D. in any game, the best response of a player is also her dominant strategy
C
firm provides a good or service that has no close substitutes. This question explores the last part of this definition further. In 1947, the United States government charged the DuPont Company with a violation of the Sherman Act. The government argued that DuPont was monopolizing the cellophane market. At trial, the government showed that DuPont produced nearly 75 percent of all of the cellophane sold in the United States each year. Nonetheless, the U.S. Supreme Court ruled in favor of DuPont and dismissed the case. Which of the following is a likely argument used by DuPont to convince the Supreme Court that it did not violate the Sherman Act? A. As a monopoly, DuPont was beneficial to the community since it hired many workers and paid high salaries. B. cellophane is a small part of consumers' consumption, so monopoly pricing has not caused any harm to consumers C. There are many close substitutes for cellophane such as aluminum foil and waxedpaper, so DuPont did not have significant market power D. Since DuPont only produced 75 percent of all cellophane, not 100 percent, it is a price-taker with no pricing power
C
(Consider the following graphs) which of the following graphs above corresponds to a firm that faces perfect competition? A. none B. graph A C. graph B D. graph C
D
(Figure question) The game is played between two players, Player A and Player B. Each player has a penny and must secretly turn the penny to heads or tails. The players then reveal their choices simultaneously. If the pennies match (both heads or both tails), Player A keeps both pennies. If the pennies do not match (one heads and one tails), Player B keeps both pennies. Construct the payoff matrix for Player A and Player B. Identify the Nash equilibrium(s): a. Boxes 1 and 4 B. boxes 2 and 3 C. boxes 1,2,3,4 D. there are none
D
(Figure question: what is the profit-maximizing quantity that the monopolist should produce if it faces a constant marginal cost of $5?) A. 400 units B. 300 units C. 600 units D. 200 units
D
(Scenario Question) jack will derive ___ units of utility if Jill tries to move the tree while he does not try at all. A. -5 B. 5 C. 10 D. -2
D
(figure question) David's dominant strategy is Low Price, and Jordan's dominant strategy is Low Price. The Nash equilibrium is ___________. A. A B. B C. C D. D
D
(figure question) Two gas stations, A and B, are locked in a price war. Each player has the option of raising its price (R) or continuing to charge the low price (C). They will choose strategies simultaneously. If both choose C, they will both suffer a loss of $−10. If one chooses R and the other chooses C, (i) the one that chooses R loses many of its customers and earns $0, and (ii) the one that chooses C wins many new customers and earns $100. If they both choose R the price war ends and they each earn $50. Does either player have a dominant strategy? Explain A. The stations have a dominantstrategy, which is for Station A to pick C and Station B to pick R because this is a best response regardless of what the other station does. B. The stations have a dominantstrategy, which is for Station A to pick R and Station B to pick C because this maximizes their joint payoff. C. The stations have a dominantstrategy, which is to pick C because this is a best response regardless of what the other station does. D. The stations do not have dominant strategies because what works best depends on what the other station does.
D
(figure question) Imagine a game in which two drivers drive toward each other on a collision course: one must swerve, or both may die in the crash, but if one driver swerves and the other does not, the one who swerved will be called a "chicken," meaning he is a coward. If they both go straight, then they both die, earning -10 happiness points each. If one goes straight and the other swerves, then the brave driver gets 5 points of happiness and the "chicken" loses 2 points of happiness. If both drivers swerve, then it is a tie and nobody earns any happiness points. Construct the payoff matrix for Driver 1 and Driver 2. Identify the Nash equilibrium A. box 2 B. box 3 C. box 4 D. boxes 2 and 3
D
(scenario question) Scenario: Two friends are playing a game. The rules of the game are simple. Each player is given a bag containing a white ball and a black ball, and the two are asked to simultaneously draw one ball each. They are informed about their payoffs just before the game begins, which are shown in the matrix below. The first number listed in each cell is the payoff to the row player, and the second number listed is the payoff to the column player. Refer to the scenario above. Which of the following is true in this case? A. nash equilibrium occurs if both the players draw white balls B. nash equilibrium occurs if Player 2 draws a black ball while Player 1 draws a black ball C. nash equilibrium occurs if player 1 draws a black ball while player 2 draws a white ball D. there is no nash equilibrium in this game.
D
**Q18. Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but can't observe their opponents move until their own move has been determined. The following are time-discounted values of all future profit streams in billions of dollars. Which of the following strategies are Nash equilibria? A. (expand, expand) B. (expand, don't) C. (don't, expand) D. B and C
D
**Q2. Which of the following is an example of differentiated goods? A. books and cosmetics B. fuel and water C. potatoes grown by different farmers D. tea and energy drinks
D
**Q20. Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but can't observe their opponents move until their own move has been determined. The following are time-discounted values of all future profit streams in billions of dollars. Which of the following strategies are Nash equilibria? A. (expand, don't) B. (don't, don't) C. (expand, expand) D. none
D
**Q29. (Scenario Question: This game ____. A. does not have a dominant strategy equilibrium B. does not have a Nash equilibrium C. has multiple Nash equilibria D. has a dominant strategy equilibrium)
D
**Q34. there are a few ship manufacturers in Polonia and each firm faces a downward sloping demand curve. The ship-building industry in Polonia is an example of a(n)____. A. perfect competition B. monopolistic competition C. monopoly D. oligopoly
D
**Q7. Which of the following is a feature of an oligopoly market? A. there is a large number of sellers in this market B. there are no barriers to entry in this market C. each firm in this market earns zero economic profits D. each firm's action affects the decisions of its rival
D
**Q8. (Scenario question: Which of the following is true? A. Mike's best response is to hold out if Rita confesses B. Rita's best response is to hold out if she expects Mike not to confess C. Rita's best response is not to confess irrespective of what Mike does D. Mike's best response is to confess irrespective of what Rita does)
D
**Two firms are planning to sell 10 or 20 units of their goods. Suppose Firm 1 decides how much to produce first. The game tree is illustrated in the figure on the right. What is the Nash equilibrium? A. the nash equilibrium is for Firm 1 to produce 20 units and for Firm 2 to produce 20 units B.the nash equilibrium is for firm 1 to produce 10 units and for firm 2 to produce 20 units C. the game does not have a Nash equilibrium D. the nash equilibrium is for Firm 1 to produce 20 units and for Firm 2 to produce 10 units
D
**Which of the following is NOT one of the sources of natural market power? A. the presence of economies of scale B. network externalities C. Controlling a key resource D. owning a firm in a small community
D
**Which of the following statements are true regarding the profit-maximizing price charged by a monopolist? A. it occurs at the quantity where MR = MC B. it occurs along the elastic part of the demand curve C. It is greater than MC D. all the above
D
*Q13. A market in which a firm emerges as a monopoly due to large economies of scale is referred to as: A. a natural monopoly B. a regulated monopoly C. a legal monopoly D. an exclusive monopoly
D
*Q16. When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product What is the price effect of the price change? A. $50 B. $75 C. $100 D. $250
D
*Q5. Which of the following statements is true? A. monopoly is characterized by no entry barriers B. perfect competition is characterized by high entry barriers C. Firms in a market with entry barriers are likely to have more market power than firms in a market D. Firms in a market with no entry barriers are likely to have more market power than firms in a market with entry barriers
D
At the profit-maximizing level of production of a monopolist, ____. A. marginal revenue exceeds marginal cost B. marginal revenue is less than marginal cost C. both marginal revenue and marginal cost are negative D. marginal revenue equals marginal cost
D
Chevron and BP are bidding against each other for new oil drilling leases in the Gulf of Mexico. The bids will be simultaneous with the high bidder as the winner. Chevron decides to hire you as a consultant to help it use game theory to make the best decision on how much to bid. What elements must be known to set up a simultaneous move game? A. name of third player, the payoffs, the move order B. the move order, the players, the strategies C. the payoffs, the move order, the players D. the players, the strategies, the payoffs
D
Chevron and BP are bidding against each other for new oil drilling leases in the Gulf of Mexico. The bids will be simultaneous with the high bidder as the winner. Chevron decides to hire you as a consultant to help it use game theory to make the best decision on how much to bid. What must you, as the consultant, construct for Chevron before you can determine if there is a dominant strategy equilibrium? A. three-by-three B. extensive-form game tree C. table with numerical probabilities D. payoff matrix
D
If a monopoly engages in first-degree price discrimination: A. the deadweight loss is maximized B. consumer surplus is maximized C. producer surplus is minimized D. social surplus is maximized
D
Perfect price discrimination occurs when: A. a firm charges the same buyer different prices at different points of time B. a firm charges different buyers according to the characteristic of their purchase C. a firm charges wealthier buyers a lower price D. a firm charges each buyer exactly their willingness to pay
D
Q15. When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product What is the quantity effect of the price change? A. $50 B. $75 C. $150 D. $300
D
Q16. Which of the following is true of monopolistic competition? A. there is only one seller in this market structure B. the product sold by each seller in this market structure is identical C. the firms in this market structure earn huge economic profits in the long run D. there are a large number of sellers each selling a differentiated product
D
Q17. A monopolistically competitive firm always faces a(n)___. A. horizontal demand curve B. vertical demand curve C. upward sloping demand curve D. downward sloping demand curve
D
Q19. Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but can't observe their opponents move until their own move has been determined. The following are time-discounted values of all future profit streams in billions of dollars. Which of the following strategies are Nash equilibria? A. (expand, expand) B. (expand, don't) C. (don't, expand) D. B and C
D
Q21. Alec and Kim used to be much better friends than they are now. The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is given below. Which of the following strategies are Nash equilibria? A. (gift, gift) B. (gift, no) C. (no, gift) D. (no, no)
D
Q3. _____ is the market structure in which there are a few rival firms. A. perfect competition B. monopolistic competition C. monopoly D. oligopoly
D
Q30. (Scenario Question: Collectively, the firms will be better off it: A. Firm 1 chooses to dump its waste into the river while Firm 2 chooses not to dump itswaste. B. Firm 2 chooses to dump its waste into the river while Firm 1 chooses not to dump itswaste. C. both firms choose to dump their waste into the river. D. neither of the firms dumps its waste into the river.)
D
Q9. (Scenario Question: what will the outcome of this game be? A. Mike will confess while Rita will not confess B. Rita will confess while Mike will not confess C. Neither of them will confess D. both of them will confess)
D
Suppose Good A belongs to a market where the firms earn zero economic profits in the long-run and entry of new firms will result in price changes that operate through shifts in the market supply curve for Good A. Which market structure does Good A belong to? A. the oligopolistic market with homogenous products B. the monopolistic competitive market C. the oligopolistic market with differentiated products D. the perfectly competitive market
D
Suppose that a goalie is playing a mixed strategy between diving to the left and the right. A player decides which strategy to employ when playing a game with mixed strategies by choosing ___. A. based on the dominant strategy B. the Fibonacci sequence C. based on the Nash equilibrium D. randomly
D
Suppose that a player has a dominant strategy. Would she choose to play a mixed strategy (such as playing two strategies each with probability 50-50)? Why or why not? A. yes, because mixed strategy would involve choosing a single action B. yes, a mixed strategy would be optimal if one of its actions were the dominant strategy C. no, because a mixed strategy would not use preassigned probabilities for the various actions D. no, because it would involve choosing actions other than the dominant strategy
D
Suppose two countries A and B choose the quantity of oil to produce simultaneously and without consulting with one another. What is each country's dominant strategy? A. neither has a dominant strategy B. a's dominant strategy is to produce 20 and B's dominant strategy is to produce 10 C. a's dominant strategy is to produce 10 and B's dominant strategy is to produce 20 D. each country's dominant strategy is to produce 20
D
Suppose you and your friends decide to go to the beach during spring break. You need to fly from Kansas City to Miami but only two airlines provide the service. This market is best characterized as ___________. A. perfect competition B. monopolistic competition C. monopoly D. oligopoly
D
Suppose you are a monopolist, and you have two customers, A and B. Each will buy either zero or one unit of the good you produce. A is willing to pay up to $45 for your product; B is willing to pay up to $10. You produce this good at a constant average and marginal cost of $5. If you could not engage in third-degree price discrimination, what price would you charge? A. $55 B. $15 C. $10 D. $45
D
Two firms are thinking of entering a new market. If one enters it will be successful but if a second enters both will suffer very large losses. Is there a first-mover advantage in this game? A. no, the firm that goes first can enter and the firm that goes second will have no incentive to enter B. yes, the firm that goes first can choose not to enter and therefore incur large losses C. No, the firm that goes first can choose not to enter and the firm that goes second will therefore incur large losses D. yes, the firm that goes first can enter and the firm that goes second will have no incentive to enter
D
Two gas stations, A and B, are locked in a price war. Each player has the option of raising its price (R) or continuing to charge the low price (C). They will choose strategies simultaneously. If both choose C, they will both suffer a loss of $−10. If one chooses R and the other chooses C, (i) the one that chooses R loses many of its customers and earns $0, and (ii) the one that chooses C wins many new customers and earns $100. If they both choose R the price war ends and they each earn $50. What is the Nash equilibrium? A. the Nash equilibrium is for both stations to pick C. B. the Nash equilibrium is for both stations to pick R C. the nash equilibria are for both stations to pick R and for both stations to pick C
D
Use a matrix to model a two-player game of rock-paper-scissors with a payoff of 1 if you win, -1 if you lose, and 0 if you tie. Construct the payoff matrix for this game. The nash equilibrium is: A. scissors/paper B. rock/rock C. paper/rock D. there is no nash equilibrium
NOT B D?
**Seller A increases the price of its good by 20% and still enjoys a high market demand. Due to the high demand, there is an increase in the number of similar sellers in the long-run. This is an example of monopolistic competition. Suppose Good A belongs to a market where the firms earn zero economic profits in the long-run and entry of new firms will result in price changes that operate through shifts in the market supply curve for Good A. Which market structure does Good A belong to? A. the oligopolistic market with homogenous products B. the oligopolistic market with differentiated products C. the perfectly competitive market D. the monopolistic competitive market
NOT D B?
