Microecomincs quiz review

What elements must be known to set up a simultaneous move​ game?

. The​ players, the​ strategies, the payoffs.

What is backward​ induction?

A. The procedure of solving an​ extensive-form game by first considering the last​ mover's decision.

Consumers are unlikely to switch between different brands of​ beer; most beer consumers are highly brand loyal

Neither, because differentiated products are a characteristic of both monopolistic and oligopolistic markets.

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

No, because it would involve choosing actions other than the dominant strategy.

Is a​ player's best response in a game the same as his dominant​ strategy?

Not necessarily. If a player has a dominant​ strategy, then it is his best​ response; however, every best response is not always a dominant strategy.

What must​ you, as the​ consultant, construct for Chevron before you can determine if there is a dominant strategy​ equilibrium?

Payoff matrix

Why should you use a mixed strategy to play this​ game?

Predictable behavior by one player can be taken advantage of by the other player

The fixed cost of setting up a brewery is relatively high

Support, because firms could earn​ long-run economic profits.

Why might game theory not always be an accurate predictor of​ real-world situations?

We do not always know the exact​ payoffs, since payoffs involve attitudes and feelings as well as monetary gains.

Anheuser-Busch and MillerCoors are two of the many firms that operate in this market

Weaken, because firms would have less market power

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?

Yes. The firm that goes first can enter and the firm that goes second will have no incentive to enter.

A pure strategy involves​ ____________.

choosing one particular action for a situation

Now assume that your coworkers will know if either you or Freddie lie to get the other​ fired, and your coworkers will shun the liar and make life miserable for that person. Given these circumstances, it would be logical for you to ___ The person who lies first in this situation ____

do nothing Suffers reputational damange

Then bidding low would be BP's _____

dominant strategy

When can backward induction be used to arrive at the equilibrium for a​ game? In the case​ of,

extensive form games.

Based on this ___, the people ___ elect this politician

extensive-form game Should Not

The person who lies first in this situation has a ____

fire-mover advantage

What is not an example of a real life zero sum​ game?

free market transaction

A​ first-mover advantage occurs if​ __________.

the first mover to act in a sequential game gets a benefit from doing so

A​ zero-sum game is when​ ___________.

the sum of the payoffs is zero

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?

​No, if you show your move first you will lose every time

Both MillerCoors and​ Anheuser-Busch increased the prices of beer when demand had actually fallen in 2009.

​Support, because firms would have market power

astounding's dominat strategy is ___, and a broadcasts domiant stratetgy is ____

Medium,No dominant strategy

The equilibrium is ____

Medium/ Medium

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?

Monopoly, because its demand is more inelastic

Given these circumstances, it owuold be logical for you to ____

lie first to get freddie fired

A monopoly may earn positive economic profits in both the long run and the short run because a​ ____________.

monopoly has entry barriers.

In the long​ run, a monopolistically competitive industry earns zero economic profits because​ ____________.

new firms enter, shifting a firms demand curve to the left

In a game with mixed​ strategies, does either of the players have a dominant​ strategy? Why or why​ not?

no, because the best choice in a mixed strategy game is to pick a random strategy

Monopolistically competitive firms might earn positive economic profits in the short run due to​ ___________.

product innovation

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​ ____________.

randomly

If this threat is credible, then the people ___ elect the politician because the ___ of the new political party changes the payoff the politician faces

should commitment