Chapter 17 Quiz

Refer to Table 17-1. If Lisa and Mark operate as a profit-maximizing monopoly in the market for water, how many gallons of water will be produced and sold?

600

Refer to Table 17-11. If both stores follow a dominant strategy, Big Box Deluxe's annual profit will grow by

$0.50 million

Refer to Table 17-11. When this game reaches a Nash equilibrium, annual profit will grow by

$0.75 million for Homes R Us and $0.50 million for Big Box Deluxe.

Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Lisa and Mark from operating as a monopoly. What will be the price of water once Lisa and Mark reach a nash equilibrium?

$40

Refer to Table 17-1. If Lisa and Mark operate as a profit-maximizing monopoly in the market for water, what price will they charge?

$60

What happens when the prisoners dilemma game is repeated numerous times in oligopoly market?

(i) and (iii) only

Refer to Table 17-1. What is the socially efficient quantity of water?

1,200 gallons

Refer to Table 17-1. Suppose the town enacts new antitrust laws that prohibit Lisa and Mark from operating as a monopoly. How many gallons of water will be produced in sold once Lisa and Mark reach a nash equilibrium?

800

Laurel and Janet are competitors in a local market and each is trying to decide if it is worthwhile to advertise. If both of them advertise, each will earn a profit of $5,000. If neither of them advertise, each will earn a profit of $10,000. If one advertises and the other doesn't, then the one who advertises will earn a profit of $12,000 and the other will earn $2,000. In this version of the prisoners dilemma if the game is played only once, Laurel should

Advertise, but if the game is to be repeated many times she should probably not advertise

Refer to Table 17-11. Increasing the size of a store store and parking lot is a dominant strategy for

Both stores

When strategic interactions are important to pricing and production decisions, a typical firm well

Consider how competing firms might respond to its actions

Refer to Table 17-17. What is grocery store 2's dominant in strategy?

Grocery store 2 should always set a low price.

The prisoner's dilemma game

Has a Nash equilibrium, but the Nash equilibrium outcome is not the outcome the players would agree to if they could cooperate with each other

Refer to Table 17-17. If grocery store 1 sets a high price, what price should grocery store 2 set? And what will grocery store 2's payoff off equal?

Low price, $800

Refer to Table 17-17. If grocery store 2 sets a high price, what price should grocery store 1 set? And what will grocery store 1's payoff equal?

Low price, $800

Game theory is important for the understanding of

Oligopolies

Game theory is necessary for understanding

Oligopoly, but it is not necessary for understanding monopoly or competition.

Refer to Table 17-11. Suppose the owners of big box deluxe and homes are us 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 in parking lot sizes

The more firms an oligopoly has,

The more likely the firms will charge a price closer to the perfectly competitive price

An equilibrium occurs in a game when

all players follow a strategy that they have no incentive to change