Chapter 14 MicroEconomics Exam Review

Which of the following oligopoly models has an equilibrium that can be described as a Nash equilibrium?

A) Cournot oligopoly model

The three most common elements in game theory models are:

A) players, strategies, and payoffs.

If a firm is better off with a particular strategy regardless of what the other firm does, then it is called the firm's:

B) dominant strategy.

Game theory is a method of analyzing:

B) the situations in which there are interdependent outcomes.

Consider a duopoly market where the players agree to collude. The single-period prisoner's dilemma game applied to this market generally predicts that:

C) both firms will cheat and the collusion agreement will break down.

A Nash equilibrium occurs when:

C) no can move from the equilibrium and improve the outcome.

A representation of how each combination of choices affects the profits of each player is known as a:

C) payoff matrix.

A prisoner's dilemma game is one in which:

C) self-interest by each player leads to an outcome where all players are worse off than if they had cooperated.

Which of the following statements is true of Nash equilibrium?

D) In a Nash equilibrium, each firm's choice is the best one given the strategy of the other player.

Which of the following is true for a two-person game which has a Nash equilibrium?

D) The game may or may not have a dominant-strategy equilibrium.

The prisoner's dilemma illustrates a situation in which:

D) each player pursuing his/her self-interest generates a collective outcome that is inferior for both.

All games that have a dominant-strategy equilibrium _____ have a Nash equilibrium; all games with a Nash equilibrium _____ have a dominant-strategy equilibrium.

D) must; may not