Deck 9: Games and Strategic Behavior

Question 1

Refer to the figure below. In this game, the dominated strategy for Player A:

A)is to play up.
B)is to cooperate with Player B.
C)is to play down.
D)will depend on Player B's move.

Answer 1

is to play down.

Question 2

Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. For both Joe and Sam, ________ is a ________.

A)cutting the price to $2.90; dominated strategy
B)leaving the price at $3; Nash equilibrium
C)leaving the price at $3; dominant strategy
D)cutting the price to $2.90; dominant strategy

Answer 2

cutting the price to $2.90; dominant strategy

Question 3

Refer to the figure below. If Jess chooses A, then Cory's best response is:   

A)non-existent.
B)to choose A.
C)to choose B.
D)to choose the cell in which Cory's payoff is 10.

Answer 3

to choose A.

Question 4

Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. The clear outcome of this game is that:

A)Joe will cut his price and Sam won't.
B)both Joe and Sam will cut their price.
C)Sam will cut his price and Joe won't.
D)neither Joe nor Sam will cut his price.

Question 5

Refer to the figure below. In the matrix above:  

A)Jess has a dominant strategy, but Cory does not.
B)Cory has a dominant strategy, but Jess does not.
C)both Cory and Jess have the same dominant strategy.
D)neither Cory nor Jess has a dominant strategy.

Question 6

Refer to the figure below. What is the Nash equilibrium of this game?

A)A chooses Up, B chooses Right
B)A chooses Up, B chooses Left
C)A chooses Down, B chooses Right
D)A chooses Down, B chooses Left

Question 7

Refer to the figure below. In this game, how many dominant strategies does Player A have?

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

Question 8

A payoff matrix shows:

A)the payoff to being a monopolist.
B)the demand curve facing a firm when there are only two firms.
C)the payoffs for each possible combination of strategies.
D)the payoff to being a perfectly competitive firm.

Question 9

Refer to the figure below. Player B can infer that Player A will:

A)always choose Down.
B)always choose Up.
C)choose Down when B chooses Left and choose Up when B chooses Right.
D)choose Up when B chooses Left and Down when B chooses Right.

Question 10

Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. For Sam, cutting his price to $2.90 per gallon is a:

A)revenue-maximizing strategy.
B)dominant strategy.
C)dominated strategy.
D)profit-maximizing strategy.

Question 11

Refer to the figure below. In this game, how many dominant strategies does Player B have?.

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

Question 12

Game theory is not useful in understanding perfect competition because in a perfectly competitive market:

A)no single firm can influence the market price, so firms' decisions are not interdependent.
B)each firm only cares about its own profit, so there is no interdependence.
C)there are too many firms to be able to model their behavior accurately using game theory.
D)the payoffs to firms' choices are unknown.

Question 13

A dominant strategy exists if:

A)a player has a strategy that yields the highest payoff regardless of the other player's choice.
B)both players have the highest payoff when they make the same choice.
C)both players make the same choice.
D)one strategy yields the highest possible payoff.

Question 14

The three elements of a game are:

A)the firm, the consumers, and the profit.
B)the players, the strategies, and the payoffs.
C)the model, the graph, and the costs.
D)the costs, the revenue, and the profit.

Question 15

Consider the accompanying payoff matrix.  
Suppose both players make their choices simultaneously and independently. What is the Nash equilibrium of this game?

A)Player A chooses Down and player B chooses Left.
B)Player A chooses Up and player B chooses Right.
C)Player A chooses Up and player B chooses Left.
D)Player A chooses Down and player B chooses Right

Question 16

Refer to the figure below. If Cory chooses A, then Jess's best response is:   

A)non-existent.
B)to choose A.
C)to choose B.
D)to choose the cell in which Jess's payoff is 10

Question 17

Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. For Joe, keeping his price at $3 per gallon is a:

A)revenue-maximizing strategy.
B)dominant strategy.
C)dominated strategy.
D)profit-maximizing strategy.

Question 18

Consider the accompanying payoff matrix.  
What is player A's dominant strategy?

A)Up
B)Down
C)Left
D)Right

Question 19

Game theory provides tools that are used to model:

A)the behavior of perfectly competitive firms.
B)the cost functions faced by firms.
C)consumer demand.
D)strategic interdependencies.

Question 20

Refer to the figure below. Player A can infer that Player B will:

A)choose Left.
B)choose Right.
C)choose Left when A chooses Up and choose Right when A chooses Down.
D)Player A cannot infer anything about what Player B will do given this matrix.

Question 21

The payoff matrix below shows the payoffs (in millions of dollars)for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital.  
An industry spy from firm A comes to firm B and offers to pay B in exchange for B's certain and enforceable promise to not invest. What is the most that firm A will be willing to pay B to not invest?

A)$30 million
B)$20 million
C)$35 million
D)$50 million

Question 22

Consider the accompanying payoff matrix. If both firms offer reduced rates, each earns ________, and if both firms keep their rates high, each earns ________.

A)300; 50
B)50; 300
C)300; 500
D)500; 300

Question 23

Consider the accompanying payoff matrix. If Column Cruises offers reduced rates, and Row Resorts keeps its rates high, then Row Resorts will earn ________, and Column Cruises will earn ________.

A)300; 300
B)50; 50
C)500; 10
D)10; 500

Question 24

A game involving two players with two possible strategies is a prisoner's dilemma if each player has a dominant strategy and:

A)neither player plays their dominant strategy.
B)each player's payoff is higher when both play their dominated strategy than when both play their dominant strategy.
C)each player's payoff is higher when both play their dominant strategy than when both play their dominated strategy.
D)there is a Nash equilibrium that yields the highest payoff for both players.

Question 25

A prisoner's dilemma illustrates situations in which:

A)resources with the lowest opportunity cost should be used first.
B)everyone does best when each person specializes in the activities in which he or she has a comparative advantage.
C)efficiency is an important social goal.
D)there is a conflict between the narrow self-interest of individuals and the broader interests of a group.

Question 26

Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. If both players choose their dominated strategy they will each earn ________, and if both players choose their dominant strategy they will each earn ________.

A)$500; $1,350
B)$900; $1,350
C)$900; $1,000
D)$1,000; $900

Question 27

A prisoner's dilemma is a game in which:

A)neither player has a dominant strategy.
B)one player has a dominant strategy and the other does not.
C)the players' payoffs are smaller when both play their dominant strategy compared to when both play a dominated strategy.
D)the players' payoffs are larger when both play their dominant strategy compared to when both play a dominated strategy.

Question 28

Consider the accompanying payoff matrix. Is this game a prisoner's dilemma?

A)Yes.
B)No.
C)It's a prisoner's dilemma for player A, but not for player B.
D)It's a prisoner's dilemma for player B, but not for player A.

Question 29

In the Nash equilibrium of a prisoner's dilemma:

A)there is no cash left on the table.
B)there is unrealized opportunity for both to gain.
C)total economic surplus is maximized.
D)both players have equal payoffs.

Question 30

Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. In this situation, the Nash equilibrium yields a:

A)lower payoff than each would receive if each played his dominant strategy.
B)higher payoff than each would receive if each played his dominant strategy.
C)lower payoff than each would receive if each played his dominated strategy.
D)the same payoff that each would receive if each played his dominated strategy.

Question 31

Consider the accompanying payoff matrix. The dominant strategy for Row Resorts is to ________ , and the dominant strategy for Column Cruises is to ________ .

A)keep rates high; keep rates high
B)offer reduced rates; offer reduced rates
C)keep rates high; offer reduced rates
D)offer reduced rates; keep rates high

Question 32

The reason that the prisoner's dilemma presents a dilemma is that:

A)neither player has a comparative advantage, so neither can infer what the other player will choose.
B)the market cannot be in equilibrium because the players do not have dominant strategies.
C)each player has an incentive to play his or her dominant strategy, but when both choose the dominant strategy each player has a lower payoff than if they both had chosen the dominated strategy.
D)each player has an incentive to play his or her dominated strategy, but when both choose the dominated strategy each player has a lower payoff than if they both had chosen the dominant strategy.

Question 33

The payoff matrix below shows the payoffs (in millions of dollars)for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital.  
This game is an example of a:

A)cartel.
B)credible promise.
C)prisoner's dilemma.
D)game with multiple equilibria.

Question 34

The payoff matrix below shows the payoffs (in millions of dollars)for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital.  
An industry spy comes to firm B and claims to know what firm A has decided. Given that each firm already knows the payoff matrix, how much would this information be worth to firm B?

A)$0
B)$50 million
C)$30 million
D)$70 million

Question 35

Consider the accompanying payoff matrix. When Row Resorts and Column Cruises both play their dominant strategy:

A)both firms do better than if they had both played their dominated strategy.
B)Row Resorts earns a higher profit than does Column Cruises.
C)both firms do worse than if they had both played their dominated strategy.
D)Column Cruises earns a higher profit than does Row Resorts.

Question 36

The payoff matrix below shows the payoffs (in millions of dollars)for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital.  
An industry spy comes to firm B and offers to pay B in exchange for B's certain and enforceable promise to not invest. How much must the spy pay B?

A)$0
B)At least $15 million
C)At least $35 million
D)At least $50 million

Question 37

The dilemma in a prisoner's dilemma is that:

A)the outcome is random, so players are uncertain about which strategy to play.
B)only one player has a dominant strategy, but the other player is uncertain about what to do.
C)the players would be better off if they both played a dominated strategy.
D)the players may be trapped in a game they don't know how to play.

Question 38

The payoff matrix below shows the payoffs (in millions of dollars)for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital. Firm A's dominant strategy is to ________, and Firm B's dominant strategy is to ________.

A)invest; not invest
B)not invest; invest
C)invest; invest
D)not invest; not invest

Question 39

Consider the accompanying payoff matrix. If Row Resorts keeps its rates high, then Column Cruises would receive the highest payoff if it:

A)kept its rates high.
B)offered reduced rates.
C)agreed with Row Resorts to reduce their rates at exactly the same time.
D)choose either strategy because it will have the same payoff in either case.

Question 40

Consider the accompanying payoff matrix. If Row Resorts offers reduced rates, then Column Cruises would receive the highest payoff if it:

A)kept its rates high.
B)offered reduced its rates.
C)entered into a cartel with Row Resorts and agreed to jointly reduce rates.
D)choose either strategy because it will have the same payoff in either case.

Question 41

OPEC is an example of a:

A)monopsony.
B)cartel.
C)monopoly.
D)duopoly.

Question 42

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. Suppose Quick Buck and Pushy Sales decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Quick Buck cheats by reducing its price to $1 while Pushy Sales continues to comply with the collusive agreement, then Quick Buck will sell ________ units and Pushy Sales will sell ________ units.

A)0; 3,000
B)3,000; 1,000
C)2,000; 1,000
D)3,000; 0

Question 43

Cartel agreements are difficult to sustain because:

A)it's a dominant strategy for each cartel member to cheat on the cartel agreement.
B)the collective payoff to all the cartel members is lower when they all abide by the cartel agreement.
C)cartel members do not face the economic incentives inherent in a prisoner's dilemma.
D)it's usually easy to discover if one of the members has cheated.

Question 44

Most cartels cease to be effective because:

A)of strict enforcement of antitrust legislation.
B)of the incentive to cheat on the cartel agreement.
C)the dominant firm buys out the other firms.
D)consumers discover the cartel and buy from other firms instead.

Question 45

Suppose Firm A and Firm B are considering whether to invest in a new production technology. For each firm, the payoff to investing (given in thousands of dollars per day)depends upon whether the other firm invests, as shown in the payoff matrix below. Which of the following statements is correct?

A)It cannot be determined whether Firm A has a dominated strategy.
B)"Don't invest" is a dominated strategy for Firm A.
C)Firm A does not have a dominated strategy.
D)"Invest" is a dominated strategy for Firm A.

Question 46

Suppose Firm A and Firm B are considering whether to invest in a new production technology. For each firm, the payoff to investing (given in thousands of dollars per day)depends upon whether the other firm invests, as shown in the payoff matrix below.  
Is this game a prisoner's dilemma?

A)Yes.
B)No.
C)It cannot be determined.
D)Only when both Firm A and Firm B invest.

Question 47

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. Suppose Acme and Mega decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Mega cheats on the agreement by reducing its price to $1 while Acme continues to comply with the collusive agreement, then Mega's economic profit will be ________.

A)$75
B)$100
C)$150
D)$200

Question 48

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. Suppose Quick Buck and Pushy Sales decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Quick Buck cheats by reducing its price to $1 while Pushy Sales continues to comply with the collusive agreement, then Quick Buck's economic profit will be ________.

A)$6,000
B)$4,000
C)$2,000
D)$3,000

Question 49

Suppose Firm A and Firm B are considering whether to invest in a new production technology. For each firm, the payoff to investing (given in thousands of dollars per day)depends upon whether the other firm invests, as shown in the payoff matrix below.  
 
What is the Nash equilibrium of this game?

A)Firm A invests, and Firm B doesn't invest.
B)Firm A doesn't invest, and Firm B invests.
C)Firm A doesn't invest, and Firm B doesn't invest.
D)Firm A invests, and Firm B invests.

Question 50

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. Suppose Quick Buck and Pushy Sales decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Quick Buck cheats by reducing its price to $1 and Pushy Sales matches the price cut, then if consumers are evenly split between the two firms, what will be Quick Buck's economic profit?

A)$1,000
B)$1,500
C)$2,000
D)$3,000

Question 51

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. Suppose Acme and Mega decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Mega cheats on the agreement by reducing its price to $1 while Acme continues to comply with the collusive agreement, then Mega will then sell ________ units and Acme will sell ________ units.

A)150; 50
B)100; 50
C)150; 0
D)100; 0

Question 52

The payoff matrix below shows the daily profit for two firms, Row Restaurant and Column Cafe, for two different strategies, publishing coupons in the student paper and not publishing coupons in the student paper.  
If Column Cafe publishes coupons and Row Restaurant does not, then Row Restaurant will earn ________, and Column Cafe will earn ________.

A)$10; $200
B)$25; $25
C)$200; $10
D)$120; $120

Question 53

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. For a monopolist facing this demand curve, the profit-maximizing quantity is ________ and the profit-maximizing price is ________.

A)50; $2
B)100; $2
C)50; $3
D)100; $1

Question 54

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. Suppose Acme and Mega decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Mega cheats on the agreement by reducing its price to $1 and Acme matches the price cut, then if consumers are evenly split between the two firms, Acme's economic profit will be ________.

A)$75
B)$100
C)$150
D)$200

Question 55

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. If Acme and Mega decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price, then what will be Mega's economic profit?

A)$0
B)$50
C)$100
D)$150

Question 56

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. If Quick Buck and Pushy Sales decide to collude and work together as a monopolist, then together they should produce ________ units per month and charge ________ per unit.

A)3,000; $1
B)4,000; $2
C)2,000; $2
D)1,000; $3

Question 57

The payoff matrix below shows the daily profit for two firms, Row Restaurant and Column Cafe, for two different strategies, publishing coupons in the student paper and not publishing coupons in the student paper.  
The payoffs of this game are such that:

A)if Row Restaurant expects Column Cafe to choose its dominant strategy, then Row Restaurant should choose its dominated strategy.
B)profit at each firm is higher when they both follow their dominant strategy than when they both follow their dominated strategy.
C)both firms would benefit from a law that made publishing coupons illegal.
D)an agreement not to publish coupons would be easy to maintain because neither firm has an incentive to defect.

Question 58

The payoff matrix below shows the daily profit for two firms, Row Restaurant and Column Cafe, for two different strategies, publishing coupons in the student paper and not publishing coupons in the student paper.    
If Row Restaurant publishes coupons, Column Cafe would earn the highest profit if it:

A)did not publish coupons.
B)also published coupons.
C)chooses either strategy because Column Cafe will have the same profit in either case.
D)only offered coupons half of the time.

Question 59

A coalition of firms who agree to restrict output for the purpose of earning an economic profit is called a(n):

A)pure monopoly.
B)oligopoly.
C)cartel.
D)duopoly.

Question 60

Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. If Quick Buck and Pushy Sales decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price, then what will be Quick Buck's economic profit?

A)$1,000
B)$2,000
C)$3,000
D)$4,000

Question 61

Before it became illegal, cigarette manufacturers once relied heavily on TV advertising. According to the textbook, when the government banned TV advertising, the cigarette manufacturers:

A)supported the ban due to their concern over health effects of smoking.
B)thought their First Amendment rights were being violated.
C)were made worse off because the ban significantly reduced cigarette sales.
D)benefited because the decision about whether to advertise on TV was a prisoner's dilemma.

Question 62

Suppose Grandis and Immanis are the only two companies that sell the product whose market demand curve is shown in the accompanying figure. For both companies, both average total cost and marginal cost are constant and equal to $2 (ATC = MC = $2). Suppose Grandis and Immanis agree to collude by both charging the price a monopolist would charge and each producing half of the monopolist's profit-maximizing level of output. If they both abide by this agreement, then each will earn a profit of ________ per day.

A)$150
B)$75
C)$90
D)$45

Question 63

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU). The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars)depends on whether they abide by the agreement or cheat on the agreement.  
Suppose the game above is repeated every day, and both firms adopt the following strategy: cooperate on the first day, then if the other firm cheats, cheat the next day, and if the other firm abides, abide the next day. This type of strategy is likely to increase the probability that:

A)both firms cheat.
B)Bagel World cheats.
C)both firms abide.
D)Bagels'R'Us cheats.

Question 64

A strategy that limits defection in a repeated prisoner's dilemma game is:

A)a Nash equilibrium.
B)a tit-for-tat strategy.
C)a cartel.
D)an ultimatum bargaining game.

Question 65

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU). The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars)depends on whether they abide by the agreement or cheat on the agreement. In the Nash equilibrium of this game:

A)both firms abide by the agreement
B)Bagel World abides and Bagels'R'Us cheats
C)both firms cheat on the agreement
D)Bagel World cheats and Bagels 'R' Us abides

Question 66

According to the text, everyone shouts at a party in order to be heard. If instead everyone spoke at a normal volume people would still be heard, but people continue to shout because:

A)shouting is a dominated strategy.
B)shouting is a dominant strategy.
C)shouting can be sustained using a tit-for-tat strategy.
D)the payoff matrix is unknown to the people at a party.

Question 67

A decision tree is used when modeling:

A)any type of game.
B)simultaneous decisions.
C)a prisoner's dilemma.
D)games in which timing matters.

Question 68

Suppose Grandis and Immanis are the only two companies that sell the product whose market demand curve is shown in the accompanying figure. For both companies, both average total cost and marginal cost are constant and equal to $2 (ATC = MC = $2). Suppose Grandis and Immanis agree to collude by both charging the price a monopolist would charge and each producing half of the monopolist's profit-maximizing level of output. Grandis, however, decides to cheat on the collusive agreement. If Grandis charges $1 less than the monopoly price while Immanis continues to charge the monopoly price, then Grandis will earn a profit of ________ per day.

A)$160
B)$80
C)$40
D)$20

Question 69

In a repeated prisoner's dilemma, players:

A)never learn to play their dominant strategies.
B)can sustain cooperation by employing a tit-for-tat strategy.
C)can sustain cooperation by playing their dominant strategy.
D)always play their dominant strategy.

Question 70

A ________ describes the possible moves in a game in sequence and lists the payoffs to each possible combination of moves.

A)decision tree
B)payoff matrix
C)game graph
D)multi-period game

Question 71

The table below shows how the payoffs to two political candidates depend on whether the candidates run a positive or negative campaign. The payoffs are given in terms of the percentage change in the number of votes received. Running a negative campaign is ________ for the ________ candidate.

A)a dominated strategy; Democratic
B)a dominated strategy; Republican
C)a dominant strategy; Democratic
D)neither a dominant nor dominated strategy; Republican

Question 72

The table below shows how the payoffs to two political candidates depend on whether the candidates run a positive or negative campaign. The payoffs are given in terms of the percentage change in the number of votes received.  
In the Nash equilibrium of this game:

A)both candidates run positive campaigns.
B)one candidate runs a positive campaign, and the other runs a negative campaign.
C)as long as one party runs a positive campaign, the other does too.
D)both candidates run negative campaigns.

Question 73

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU). The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars)depends on whether they abide by the agreement or cheat on the agreement.  
For Bagel World, ________ is a ________.

A)abiding by the agreement; dominant strategy
B)cheating on the agreement; dominated strategy
C)cheating on the agreement; dominant strategy
D)abiding by the agreement; dominant strategy when Bagels'R'Us also abides

Question 74

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU). The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars)depends on whether they abide by the agreement or cheat on the agreement.  
For Bagels'R'Us, ________ is a ________.

A)abiding by the agreement; dominant strategy
B)cheating on the agreement; dominated strategy
C)cheating on the agreement; dominant strategy
D)abiding by the agreement; dominant strategy when Bagel World also abides

Question 75

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU). The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars)depends on whether they abide by the agreement or cheat on the agreement.  
Suppose the game above is repeated every day, and both firms adopt the following strategy: cooperate on the first day, then if the other firm cheats, cheat the next day, and if the other firm abides, abide the next day. This type of strategy is known as:

A)a prisoner's dilemma.
B)the cartel solution.
C)a tit-for-tat strategy.
D)the golden rule.

Question 76

In tit-for-tat, if your partner ________ in your first interaction, then you will ________ in your next interaction.

A)defects; cooperate
B)defects; defect
C)cooperates; defect
D)defects; refuse to play

Question 77

The market for bagels contains two firms: BagelWorld (BW)and Bagels'R'Us (BRU). The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars)depends on whether they abide by the agreement or cheat on the agreement.  
Is this game a prisoner's dilemma?

A)No, because cheating yields the highest payoff for both firms
B)Yes, because if both firms played their dominated strategy, they each would earn a higher payoff than when they both play their dominant strategy.
C)Yes, because if both firms played their dominant strategy, they each would earn a higher payoff than when they both play their dominated strategy.
D)No, because neither firm has a dominant strategy

Question 78

The table below shows how the payoffs to two political candidates depend on whether the candidates run a positive or negative campaign. The payoffs are given in terms of the percentage change in the number of votes received.  
Suppose that the Republican candidate tells the Democratic candidate that he intends to run a positive campaign. The likely result is that:

A)both candidates will run a positive campaign.
B)the Republican candidate will run a positive campaign, and the Democratic candidate will run a negative campaign.
C)both candidates will run a negative campaign.
D)the Republican candidate will run a negative campaign, and the Democratic candidate will run a positive campaign.

Question 79

The tit-for-tat strategy only works for a prisoner's dilemma that:

A)has only one Nash equilibrium.
B)is played only one time.
C)does not have a Nash equilibrium.
D)is repeated.

Question 80

Suppose the market for bottled water is served by two oligopolists. If they reach an agreement to restrict production and charge a price above marginal cost, then:

A)they will earn a larger profit than a monopolist would have earned.
B)they will charge a higher price than a monopolist would have charged.
C)their agreement is likely to eventually collapse.
D)neither firm will have an incentive to cheat on the agreement since it benefits them both.