Question 1

The term prisoners' dilemma refers to a game in which

Accepted Answer

A)   there are no Nash equilibria.
B)   there are no dominant strategies.
C)   the payoff from playing the dominant strategy is the same for each player.
D)   the payoff from playing the dominant strategy is not the highest payoff possible.

Question 2

Which of the following constitutes a mixed strategy Nash equilibrium of the Odds and Evens game?

Accepted Answer

A)   Play Even and Odd with 50% probability each.
B)   Play Even with 75% probability and Odd with 25% probability.
C)   Always play Even.
D)   This game has no mixed strategy Nash equilibrium.

Question 3

Which of the following is a dynamic game?

Accepted Answer

A)   rock-paper-scissors
B)   flipping pennies
C)   chess
D)   the card game "war"

Question 4

-The game rock-paper-scissors has

Accepted Answer

A)   a mixed strategy equilibrium.
B)   a dominant strategy equilibrium.
C)   no equilibrium.
D)   a pure strategy equilibrium.

Question 5

A player can choose among three strategies: T,M,and B.Nevertheless,strategy B is dominated by strategy T.This means that

Accepted Answer

A)   strategy T is always played.
B)   strategy B is never played.
C)   strategy B will be part of a Nash equilibrium.
D)   strategy M is never played.

Question 6

Assume a firm is a monopoly and enjoys $10,000,000 profits per year.The firm lobbies to have a moratorium passed by Congress on new firms in its market for the next 25 years.If there is no discount rate,how much would the firm be willing to pay to deter entry?

Accepted Answer

A)   $250 million
B)   $25 million
C)   $100 million
D)   $250 billion

Question 7

A single-period duopoly firm can choose output level A or B.The firm decides it will produce level A regardless of what the other firm produces.This decision may occur because

Accepted Answer

A)   producing the output level A is a dominant strategy.
B)   this firm has simply decided to always produce at level A.
C)   Both A and B are possible.
D)   None of the above.

Question 8

Which of the following is a simultaneous decision game?

Accepted Answer

A)   Tic-tac-toe
B)   Chess
C)   Poker
D)   Rock-paper-scissors

Question 9

What is the counter-intuitive solution to a mixed strategy?

Accepted Answer

A)   Player A makes Player B indifferent between its strategy choices.
B)   Player A makes itself indifferent between its strategy choices.
C)   Player A changes the rules of the game.
D)   There are no mixed strategies in most games.

Question 10

If an incumbent threatens to retaliate against entry,but its profits are greater under accommodated entry than under the proposed threat,potential entrants will ignore the threat.

Accepted Answer

A) True 
 B)False

Question 11

What is the primary difference between a mixed strategy and a pure strategy?

Accepted Answer

A)   Pure strategies are always dominated strategies.
B)   Mixed strategies call for randomizing over possible actions, pure strategies do not.
C)   Pure strategies are much more common than mixed strategies.
D)   Mixed strategies are not optimal whereas pure strategies are.

Question 12

Suppose market demand is p = 10 - Q.Firms have a fixed entry cost of 5 and no marginal cost.If firm A is the incumbent,can it deter the entry of its rival,firm B?

Accepted Answer

Firm B's reaction function is q_B = 5 - (1...

Question 13

-The above figure shows a payoff matrix for two firms,A and B,that must choose between selling basic computers or advanced computers.How many Nash equilibria are there?

Accepted Answer

A)   0
B)   1
C)   2
D)   4

Question 14

-The above figure shows the payoff to two gasoline stations,A and B,deciding to operate in an isolated town.Suppose a $30 fee is required to enter the market.If firm A chooses its strategy first,then

Accepted Answer

A)   firm A will not enter.
B)   neither firm will enter.
C)   both firms will enter.
D)   firm A will enter and firm B will not.

Question 15

If the payoff to the United States to pursuing nuclear weapons is 100 if the USSR does not pursue nuclear weapons and 50 if they do,and the payoff to the USSR to pursuing nuclear weapons is 80 if the USA doesn't pursue nuclear weapons and 30 if they do,what is the non-cooperative equilibrium?

Accepted Answer

A)   The USA pursues nuclear weapons, the USSR does not.
B)   The USA pursues nuclear weapons, the USSR pursues nuclear weapons.
C)   The USA does not pursue nuclear weapons, the USSR does not pursue nuclear weapons.
D)   The USA does not pursue nuclear weapons, the USSR does pursue nuclear weapons.

Question 16

In a two-player simultaneous game,if player A has a dominant strategy and player B does not,player B will

Accepted Answer

A)   employ a mixed strategy.
B)   choose his best strategy assuming that player A plays her dominant strategy.
C)   not achieve a Nash equilibrium.
D)   assume that player A does not choose her dominant strategy.

Question 17

Repeated games are conducive to

Accepted Answer

A)   explicit cooperation.
B)   tacit cooperation.
C)   corruption.
D)   failing to have a Nash equilibrium.

Question 18

Deterring entry might require a firm to

Accepted Answer

A)   price their product closer to the competitive price than to the monopoly price.
B)   price their product closer to the monopoly price than to the competitive price.
C)   drop output almost to zero to show the consumers "who's boss."
D)   drop price almost to zero to get price below marginal cost.

Question 19

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,which one of the following statements is true?

Accepted Answer

A)   Only firm A will enter the market.
B)   Only firm B will enter the market.
C)   Neither firm entering is a Nash equilibrium.
D)   The outcome of the game is unpredictable.

Question 20

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant.Assuming a fixed cost of entry,the incumbent will deter entry because

Accepted Answer

A)   it is more profitable than accommodating entry.
B)   it increases consumer surplus.
C)   the potential entrant winds up with zero profit.
D)   the incumbent would earn zero profit if it accommodated entry.

Exam 14: Game Theory

A player can choose among three strategies: T,M,and B.Nevertheless,strategy B is dominated by strategy T.This means that

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The term prisoners' dilemma refers to a game in which

Correct AnswerverifiedShow Answer

-The above figure shows a payoff matrix for two firms,A and B,that must choose between selling basic computers or advanced computers.How many Nash equilibria are there?

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-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,which one of the following statements is true?

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Which of the following constitutes a mixed strategy Nash equilibrium of the Odds and Evens game?

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If the payoff to the United States to pursuing nuclear weapons is 100 if the USSR does not pursue nuclear weapons and 50 if they do,and the payoff to the USSR to pursuing nuclear weapons is 80 if the USA doesn't pursue nuclear weapons and 30 if they do,what is the non-cooperative equilibrium?

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-The above figure shows the payoff to two gasoline stations,A and B,deciding to operate in an isolated town.Suppose a $30 fee is required to enter the market.If firm A chooses its strategy first,then

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Assume a firm is a monopoly and enjoys $10,000,000 profits per year.The firm lobbies to have a moratorium passed by Congress on new firms in its market for the next 25 years.If there is no discount rate,how much would the firm be willing to pay to deter entry?

Correct AnswerverifiedShow Answer

Which of the following is a simultaneous decision game?

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What is the counter-intuitive solution to a mixed strategy?

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Suppose market demand is p = 10 - Q.Firms have a fixed entry cost of 5 and no marginal cost.If firm A is the incumbent,can it deter the entry of its rival,firm B?

Correct AnswerverifiedFirm B's reaction function is qB = 5 - (1...View AnswerShow Answer

If an incumbent threatens to retaliate against entry,but its profits are greater under accommodated entry than under the proposed threat,potential entrants will ignore the threat.

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What is the primary difference between a mixed strategy and a pure strategy?

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A single-period duopoly firm can choose output level A or B.The firm decides it will produce level A regardless of what the other firm produces.This decision may occur because

Correct AnswerverifiedShow Answer

Deterring entry might require a firm to

Correct AnswerverifiedShow Answer

-The above figure shows the payoff matrix facing an incumbent firm and a potential entrant.Assuming a fixed cost of entry,the incumbent will deter entry because

Correct AnswerverifiedShow Answer

In a two-player simultaneous game,if player A has a dominant strategy and player B does not,player B will

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Repeated games are conducive to

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-The game rock-paper-scissors has

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Which of the following is a dynamic game?

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Firm B's reaction function is q_B = 5 - (1...
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