Question 1

&#10;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?&#10;A) Only firm A will enter the market.&#10;B) Only firm B will enter the market.&#10;C) Neither firm entering is a Nash equilibrium.&#10;D) The outcome of the game is unpredictable.

Accepted Answer

A

Question 2

&#10;The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,what will happen if the government offers a $30 subsidy to airlines that serve this route?&#10;A) Both firms will enter profitably.&#10;B) Firm A will decide not to enter since firm B will.&#10;C) Firm B is still better off not entering.&#10;D) Neither firm will have a dominant strategy.

Accepted Answer

With a $30 subsidy, both firms can enter profitably because the subsidy offsets their losses or increases their profits, making the route attractive to both.

Question 3

Which of the following games is NOT analyzed with game theory?&#10;A) State Lottery&#10;B) Poker&#10;C) Car Chases&#10;D) Auctions

Accepted Answer

A

Question 4

&#10;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?&#10;A) 0&#10;B) 1&#10;C) 2&#10;D) 4

Accepted Answer

A Nash equilibrium occurs when each player's strategy is optimal given the other player's strategy. Without the specific payoff matrix, we can't identify the exact equilibria, but generally, in games like these, multiple Nash equilibria can exist depending on the payoffs for each strategy combination. For example, if both firms choosing the same type of computer (either both choosing basic or both choosing advanced) results in the highest payoff for each given the other's choice, then there would be two Nash equilibria.

Question 5

A mixed strategy may&#10;A) be part of a Nash equilibrium.&#10;B) be a set of probabilities of selecting each possible action.&#10;C) lead identical firms to choose different actions.&#10;D) All of the above.

Accepted Answer

A mixed strategy can be part of a Nash equilibrium when players randomize their actions to achieve an equal expected payoff. It is a set of probabilities of selecting each possible action to maximize a player's expected payoff. By choosing different random actions, identical firms can lead to different results, hence it can lead identical firms to choose different actions.

Question 6

When neither player has a dominant strategy,&#10;A) game theory will not provide information.&#10;B) no Nash-Equilibrium exists.&#10;C) at least one Nash-Equilibrium exists.&#10;D) the game cannot be analyzed.

Accepted Answer

When neither player has a dominant strategy, it is still possible for a Nash-Equilibrium to exist. Each player's best response may depend on the other player's choice, and this can lead to a situation where both players are playing their best response given the other player's choice. This is known as a Nash-Equilibrium and at least one such equilibrium always exists in non-cooperative games.

Question 7

After analyzing his opponent a tennis player decides to serve 10% of his serves to the left,50% of his serves to the right,and 40% of his serves at the body of his opponent.This illustrates a&#10;A) deterministic strategy.&#10;B) dominant strategy.&#10;C) mixed strategy.&#10;D) non-game theoretic problem.

Accepted Answer

The tennis player's decision to serve 10% to the left, 50% to the right, and 40% at the body of his opponent illustrates a mixed strategy. A mixed strategy involves randomly choosing between multiple pure strategies to keep the opponent guessing and prevent them from predicting the player's next move. This is a common strategy used in game theory, particularly in situations where both players have multiple options available to them.

Question 8

Game theory shows that&#10;A) sometimes pursuing profit maximization will not yield the highest joint profit.&#10;B) interdependencies between firms have to be taken into account when few firms dominate the market.&#10;C) in an oligopolistic market, firms are likely to collude.&#10;D) All of the above.

Accepted Answer

Game theory shows that pursuing profit maximization may not yield the highest joint profit when there are interdependencies between firms, particularly in an oligopolistic market where firms are more likely to collude. Therefore, all the options (A), (B), and (C) are correct.

Question 9

&#10;The above figure shows a payoff matrix for two firms,A and B,that must choose between a high-price strategy and a low-price strategy.The Nash equilibrium in this game&#10;A) does not exist.&#10;B) occurs when both firms set a low price.&#10;C) occurs when both firms set a high price.&#10;D) occurs when firm A sets a high price and firm B sets a low price.

Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the other player's strategy. Here, if one firm sets a high price, the other can benefit by setting a low price, attracting more customers. However, if both set low prices, neither can benefit by unilaterally changing their strategy without making less profit. Thus, the equilibrium is when both firms set a low price, as neither firm would benefit from changing their strategy while the other firm keeps their strategy unchanged.

Question 10

Chess is an example of a&#10;A) game with perfect information.&#10;B) game with imperfect information.&#10;C) game with incomplete information.&#10;D) static game.

Accepted Answer

Chess is a perfect information game because both players have complete information about the state of the game at all times, including the position of all the pieces on the board and all the possible moves available to each player. There is no hidden information or uncertainty involved in the game.

Question 11

In a two-player simultaneous game,if player A has a dominant strategy and player B does not,player B will&#10;A) employ a mixed strategy.&#10;B) choose his best strategy assuming that player A plays her dominant strategy.&#10;C) not achieve a Nash equilibrium.&#10;D) assume that player A does not choose her dominant strategy.

Accepted Answer

The answer of In a two-player simultaneous game,if player A...

Question 12

&#10;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?&#10;A) Firm A has a dominant strategy.&#10;B) Firm B has a dominant strategy.&#10;C) Neither firm entering is a Nash equilibrium.&#10;D) The outcome of the game is unpredictable.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 13

&#10;The above figure shows a payoff matrix for two firms,A and B,that must choose between selling basic computers or advanced computers.Firm B's dominant strategy&#10;A) is to make basic computers.&#10;B) is to make advanced computers.&#10;C) is to adopt firm A's strategy.&#10;D) does not exist in this game.

Accepted Answer

The answer of  &#10;The above figure shows a payoff...

Question 14

&#10;The above figure shows a payoff matrix for two firms,A and B,that must choose between a high-price strategy and a low-price strategy.For firm B,&#10;A) setting a high price is the dominant strategy.&#10;B) setting a low price is the dominant strategy.&#10;C) there is no dominant strategy.&#10;D) doing the opposite of firm A is always the best strategy.

Accepted Answer

The answer of  &#10;The above figure shows a payoff...

Question 15

&#10;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?&#10;A) Firm A does not have a dominant strategy.&#10;B) Firm B does not have a dominant strategy.&#10;C) Neither firm entering is a Nash equilibrium.&#10;D) The outcome of the game is unpredictable.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 16

What aspects of a game are specified by &#34;the rules of the game&#34;?&#10;A) timing of players' moves&#10;B) payoffs&#10;C) information available to each player&#10;D) All of the above

Accepted Answer

The answer of What aspects of a game are specified...

Question 17

For an oligopolistic firm,which of the following can be identified as a strategy?&#10;A) Produce 10,000 units regardless of what the rivals do.&#10;B) Advertise if the rival advertises, do not advertise if the rival does not advertise.&#10;C) Raise the price if the rival raises the price, keep the current price if the rival lowers its price.&#10;D) All of above

Accepted Answer

The answer of For an oligopolistic firm,which of the following...

Question 18

The &#34;Normal-Form&#34; of a game is a description including&#10;A) the players.&#10;B) the strategies possible.&#10;C) the payoffs.&#10;D) All of the above

Accepted Answer

The answer of The &#34;Normal-Form&#34; of a game is a...

Question 19

&#10;The above figure shows a payoff matrix for two firms,A and B,that must choose between a high-price strategy and a low-price strategy.For firm A,&#10;A) setting a low price is the dominant strategy.&#10;B) setting a high price is the dominant strategy.&#10;C) setting a high price when firm B sets a high price, and setting a low price when firm B sets a low price is the dominant strategy.&#10;D) setting a high price when firm B sets a low price, and setting a low price when firm B sets a high price is the dominant strategy.

Accepted Answer

The answer of  &#10;The above figure shows a payoff...

Question 20

&#10;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?&#10;A) Since firm B has no dominant strategy, its decision is unpredictable.&#10;B) Since firm B's decision is unpredictable, firm A's decision is unpredictable.&#10;C) Neither firm entering is a Nash equilibrium.&#10;D) Firm B will not enter because it knows firm A will.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 21

&#10;The above figure shows the payoffs to two airlines,A and B,of serving a particular route.Is there a Nash equilibrium? What is it? Explain.

Accepted Answer

The answer of  &#10;The above figure shows the payoffs...

Question 22

&#10;The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,what will happen if the government offers a $30 subsidy to airlines that serve this route?&#10;A) The Nash equilibrium remains the same.&#10;B) Only firm A will have a dominant strategy.&#10;C) Both firms will choose to enter the market.&#10;D) Joint profts will be maximized.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 23

&#10;The above figure shows the payoff matrix for two firms,A and B,selecting an advertising budget.The firms must choose between a high advertising budget and a low advertising budget.Firm A's dominant strategy&#10;A) does not exist.&#10;B) is to do the opposite of firm B.&#10;C) is to select a high advertising budget.&#10;D) is to select a low advertising budget.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 24

&#10;The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,how many Nash equilibria are there?&#10;A) 0&#10;B) 1&#10;C) 2&#10;D) It cannot be determined.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 25

&#10;The above figure shows the payoff matrix for two firms,A and B,selecting an advertising budget.The firms must choose between a high advertising budget and a low advertising budget.A Nash equilibrium&#10;A) occurs when both firms select a high advertising budget.&#10;B) exists at any of the four possible strategy combinations because there is never an incentive to change strategy.&#10;C) is for both firms to choose the low advertising budget because this yields the highest joint profit.&#10;D) does not exist because firm A does not have a dominant strategy.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 26

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&#10;A) producing the output level A is a dominant strategy.&#10;B) this firm has simply decided to always produce at level A.&#10;C) Both A and B are possible.&#10;D) None of the above.

Accepted Answer

The answer of A single-period duopoly firm can choose output...

Question 27

&#10;The above figure shows the payoff matrix for two firms,A and B,choosing to produce a basic computer or an advanced computer.The joint profits&#10;A) will be maximized at a Nash equilibrium.&#10;B) will be maximized when both firms take different actions.&#10;C) will be maximized when both firms take the same actions.&#10;D) Both A and B.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 28

&#10;The above figure shows the payoff matrix for two firms,A and B,choosing to produce a basic computer or an advanced computer.Now the payoff of the firm who produces a basic computer falls to 10 if the other firm chooses to produce an advanced computer.Then the joint profits&#10;A) will be maximized at a Nash equilibrium.&#10;B) will be maximized when both firms take different actions.&#10;C) will be maximized when both firms choose to produce advanced computers.&#10;D) will be maximized when both firms choose to produce basic computers.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 29

&#10;The above figure shows the payoff matrix for two firms,A and B,choosing to produce a basic computer or an advanced computer.Which of the following is a Nash equilibrium?&#10;A) Firm A produces an advanced computer, and firm B produces a basic computer.&#10;B) Both firms produce advanced computers.&#10;C) Both firms produce basic computers.&#10;D) None of the above.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 30

&#10;The above figure shows the payoff matrix for two firms,A and B,choosing to produce a basic computer or an advanced computer.How many pure-strategy Nash equilibria are in this game?&#10;A) 0&#10;B) 1&#10;C) 2&#10;D) 3

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 31

In a non-cooperative,imperfect information,simultaneous-choice,one-period game,a Nash equilibrium&#10;A) will never exist.&#10;B) will always include dominant strategies.&#10;C) will always result in both players taking the same action.&#10;D) may not maximize the sum of the firms' profits.

Accepted Answer

The answer of In a non-cooperative,imperfect information,simultaneous-choice,one-period game,a Nash equilibrium&#10;A)...

Question 32

&#10;The above figure shows the payoff matrix for two firms,A and B,choosing to produce a basic computer or an advanced computer.Now the payoff of the firm who produces a basic computer falls to 10 if the other firm chooses to produce an advanced computer.Then&#10;A) both firms will have dominant strategies.&#10;B) Nash equilibria will not change.&#10;C) joint profits will be maximized at the Nash equilibrium.&#10;D) Firm A and firm B will choose different actions.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 33

&#10;The above figure shows the payoff matrix for two firms,A and B,choosing to produce a basic computer or an advanced computer.The mixed-strategy Nash equilibrium is&#10;A) Firm A produces an advanced computer with 80% chance, firm B produces an advanced computer with 20% chance.&#10;B) Both firms produce advanced computers with 50% chance.&#10;C) Firm A produces an advanced computer with 60% chance, firm B produces an advanced computer with 40% chance.&#10;D) Both firms produce advanced computer with 80% chance.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 34

&#10;The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,and the government imposes a $20 per firm tax on firms that service this route,which of the following maximizes the firms' joint profits?&#10;A) Neither firm services the route.&#10;B) Firm A offers firm B $20 to not enter.&#10;C) Both firms will service this route.&#10;D) Firm B offers firm A $30 to not enter.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 35

&#10;The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,what happens if the government imposes a $20 per firm tax on firms that service this route?&#10;A) Neither firm has a dominant strategy.&#10;B) Not entering is a dominant strategy for both firms.&#10;C) Neither firm entering is a Nash equilibrium.&#10;D) Only firm A will enter.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 36

&#10;The above figure shows the payoff matrix for two firms,A and B,selecting an advertising budget.The firms must choose between a high advertising budget and a low advertising budget.Firm B's dominant strategy&#10;A) does not exist.&#10;B) is to copy firm A.&#10;C) is to select a high advertising budget.&#10;D) is to select a low advertising budget.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 37

&#10;The above figure shows the payoff matrix for two firms,A and B,choosing to produce a basic computer or an advanced computer.The dominant strategy for firm A is&#10;A) producing an advanced computer.&#10;B) producing a basic computer.&#10;C) copy firm B's action.&#10;D) Firm A does not have a dominant strategy.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 38

Collusion is more likely to occur when&#10;A) there is fear of punishment for not colluding.&#10;B) there is a known finite time horizon.&#10;C) there are large gains to be made by cheating on an agreement.&#10;D) the game lasts only one period.

Accepted Answer

The answer of Collusion is more likely to occur when&#10;A)...

Question 39

&#10;The above figure shows the payoff matrix for two firms,A and B,selecting an advertising budget.The firms must choose between a high advertising budget and a low advertising budget.A Nash equilibrium is that&#10;A) firm A selects a high advertising budget and firm B selects a low advertising budget.&#10;B) firm A selects a low advertising budget and firm B selects a high advertising budget.&#10;C) both firms select a high advertising budget.&#10;D) both firms select a low advertising budget.

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 40

In a simultaneous game where both players prefer doing the opposite of what the opponent does,a Nash equilibrium does not exist.

Accepted Answer

The answer of In a simultaneous game where both players...

Question 41

13.2 Dynamic Games&#10;  &#10;The above figure shows the payoff to two gasoline stations,A and B,deciding to operate in an isolated town.If firm A chooses its strategy first,then&#10;A) firm A will not enter.&#10;B) firm B's entry is blockaded.&#10;C) both firms will enter.&#10;D) firm A will enter and firm B will not.

Accepted Answer

The answer of 13.2 Dynamic Games&#10;  &#10;The above figure...

Question 42

&#10;The above figure shows the payoff for two firms,A and B,that must each choose to produce either an advanced computer or a basic computer.Determine the dominant strategies for each firm (if any)and the Nash equilibria (if any).

Accepted Answer

The answer of  &#10;The above figure shows the payoff...

Question 43

Explain why to some game theorists,the idea of mixed strategies is appealing,and to others it is implausible.

Accepted Answer

The answer of Explain why to some game theorists,the idea...

Question 44

An incumbent's threat to retaliate after a potential competitor enters the market will be taken seriously by potential competitors if&#10;A) the incumbent can still earn a profit after carrying out the threat.&#10;B) the incumbent earns greater profit carrying out the threat than by accommodating entry.&#10;C) the potential entrant cannot earn a profit if the threat is carried out.&#10;D) the potential entrant's profit exceeds the incumbent's if the threat is carried out.

Accepted Answer

The answer of An incumbent's threat to retaliate after a...

Question 45

Suppose two firms,A and B,are simultaneously considering entry into a new market.If neither enters,both earn zero.If both enter,they both lose 100.If one firm enters,it gains 50 while the other earns zero.Set up the payoff matrix for this game and determine if any Nash equilibria exist.Can you predict the outcome? What if firm A gets to decide first?

Accepted Answer

The answer of Suppose two firms,A and B,are simultaneously considering...

Question 46

If a player has a dominant strategy in a simultaneous-move game,then she is sure to get her best outcome.

Accepted Answer

The answer of If a player has a dominant strategy...

Question 47

If neither firm has a dominant strategy,a Nash equilibrium cannot exist.

Accepted Answer

The answer of If neither firm has a dominant strategy,a...

Question 48

13.2 Dynamic Games&#10;  &#10;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&#10;A) firm A will not enter.&#10;B) neither firm will enter.&#10;C) both firms will enter.&#10;D) firm A will enter and firm B will not.

Accepted Answer

The answer of 13.2 Dynamic Games&#10;  &#10;The above figure...

Question 49

All Nash equilibria consist of Dominant Strategies

Accepted Answer

The answer of All Nash equilibria consist of Dominant Strategies...

Question 50

Why is collusion more likely in a repeated game?

Accepted Answer

The answer of Why is collusion more likely in a...

Question 51

Consider the following game:&#10;   &#10;a.Does either player have a dominant strategy? Explain.&#10;b.Use the process of iterated elimination of dominated strategies to reduce the possible outcomes for the game.&#10;c.Find all pure Nash Equilibrium(s).

Accepted Answer

The answer of Consider the following game:&#10;   &#10;a.Does...

Question 52

13.2 Dynamic Games&#10;  &#10;The above figure shows the payoff to two gasoline stations,A and B,deciding to operate in an isolated town.Suppose a $60 fee is required to enter the market.If firm A chooses its strategy first,then&#10;A) firm A will not enter.&#10;B) neither firm will enter.&#10;C) both firms will enter.&#10;D) firm A will enter and firm B will not.

Accepted Answer

The answer of 13.2 Dynamic Games&#10;  &#10;The above figure...

Question 53

The following is a simplified duopoly model of competition between two firms.Firms simultaneously choose the quantity of outputs to produce,and then profits are realized.Each firm is restricted to producing 25,35,50 or 100 units of output.The details of how the payoffs are derived are unimportant because payoffs are all given in the table below.
Firm 2

Find the Nash equilibrium(s)in the game.

Accepted Answer

The answer of The following is a simplified duopoly model...

Question 54

All normal-form games have at least one dominant strategy.

Accepted Answer

The answer of All normal-form games have at least one...

Question 55

If each player has a dominant strategy,then those strategies make up the Nash equilibrium.

Accepted Answer

The answer of If each player has a dominant strategy,then...

Question 56

&#10;a.Suppose c = 0.Find any (pure strategy)Nash Equilibrium.&#10;b.Suppose c = 2.Find any (pure strategy)Nash Equilibrium.

Accepted Answer

The answer of   &#10;a.Suppose c = 0.Find any...

Question 57

Consider two agents simultaneously deciding whether to contribute to a public good - the good is said to be public because,if it is made available,an agent who free-rides by paying nothing gets just as much pleasure from its enjoyment as an agent who paid for it.If at least one agent contributes to the construction of the public good,both agents will enjoy a payoff of four from the public good.To ensure the public good is constructed,player one must pay c₁ or player two must pay c₂.Assume that c₁ < 4 and c₂ < 4.If neither contributes,the good is not constructed and neither player gets enjoyment from the project.If one or both players contribute,then the good is constructed and each player enjoys a payoff of four minus the contribution cost if that player has contributed.The grid below shows this:

Assume that the costs are common knowledge to both players.
a.Find any pure-strategy Nash Equilibrium(s)to the game.
b.Find the Mixed Strategy Nash Equilibrium - the probabilities you find will be functions of the cost parameters.
c.If c₁ = c₂ = 1,write out the mixed strategy NE and find the probability that the public good is provided?
d.If c₁ = c₂ = 3,write out the mixed strategy NE and find the probability that the public good is provided?

Accepted Answer

The answer of Consider two agents simultaneously deciding whether to...

Question 58

If only one firm operates in a market,and a potential entrant is blockaded from entering the market,then the incumbent firm must&#10;A) have acted to prevent entry.&#10;B) be pricing where price equals marginal cost.&#10;C) be a natural monopoly.&#10;D) be the Stackelberg leader.

Accepted Answer

The answer of If only one firm operates in a...

Question 59

A Nash equilibrium will always provide both players with their highest payoffs possible.

Accepted Answer

The answer of A Nash equilibrium will always provide both...

Question 60

With regard to preventing entry,if identical firms act simultaneously,&#10;A) they cannot credibly threaten each other.&#10;B) they will all incur losses.&#10;C) only one firm will enter the market.&#10;D) none of them will enter the market.

Accepted Answer

The answer of With regard to preventing entry,if identical firms...

Question 61

Consider the game below:&#10;   &#10;a.Use backward induction to find the subgame perfect Nash equilibrium to the game.&#10;b.Model the game with a strategic grid.Find all Nash Equilibrium to the normal-form game.Why is your answer different than in (a)?

Accepted Answer

The answer of Consider the game below:&#10;   &#10;a.Use...

Question 62

A private auction is an auction in which&#10;A) individuals know their own value of the good and everyone else's valuation, too.&#10;B) individuals have their own valuation of the good but don't know everyone else's.&#10;C) many auctions are auctioned off at the same time.&#10;D) only one good is auctioned off.

Accepted Answer

The answer of A private auction is an auction in...

Question 63

A sale in which property or a service is sold to the highest bidder is called a(n)&#10;A) auction.&#10;B) bidder sale.&#10;C) competitive market.&#10;D) Austrian bundle.

Accepted Answer

The answer of A sale in which property or a...

Question 64

The individual with the highest valuation of the good will win in which of the following auctions?&#10;A) English Auction&#10;B) Dutch Auction&#10;C) Sealed Bid Auction&#10;D) All of the above.

Accepted Answer

The answer of The individual with the highest valuation of...

Deck 13: Game Theory