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Table 17-21 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul) . Table 17-21 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul) . -Refer to Table 17-21.What is (are) the Nash equilibrium (equilibria) in this Chicken game? A) John: Turn Paul: Turn B) John: Turn Paul: Drive Straight C) John: Drive Straight Paul: Turn D) Both b and c are Nash equilibria -Refer to Table 17-21.What is (are) the Nash equilibrium (equilibria) in this Chicken game?


A) John: Turn
Paul: Turn
B) John: Turn
Paul: Drive Straight
C) John: Drive Straight
Paul: Turn
D) Both b and c are Nash equilibria

E) A) and C)
F) B) and C)

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Dave and Andy are competitors in a local market.Each is trying to decide if it is better to advertise on TV,on radio,or not at all.If they both advertise on TV,each will earn a profit of $4,000.If they both advertise on radio,each will earn a profit of $7,000.If neither advertises at all,each will earn a profit of $10,000.If one advertises on TV and other advertises on radio,then the one advertising on TV will earn $6,000 and the other will earn $5,000.If one advertises on TV and the other does not advertise,then the one advertising on TV will earn $11,000 and the other will earn $2,000.If one advertises on radio and the other does not advertise,then the one advertising on radio will earn $12,000 and the other will earn $4,000.If both follow their dominant strategy,then Dave will


A) advertise on TV and earn $4,000.
B) advertise on radio and earn $7,000.
C) advertise on TV and earn $11,000.
D) not advertise and earn $10,000.

E) B) and D)
F) A) and B)

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When firms are faced with making strategic choices in order to maximize profit,economists typically use


A) the theory of monopoly to model their behavior.
B) the theory of aggressive competition to model their behavior.
C) game theory to model their behavior.
D) cartel theory to model their behavior.

E) A) and B)
F) A) and C)

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In markets characterized by oligopoly,


A) the oligopolists earn the highest profit when they cooperate and behave like a monopolist.
B) collusive agreements will always prevail.
C) collective profits are always lower with cartel arrangements than they are without cartel arrangements.
D) pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.

E) None of the above
F) B) and D)

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Suppose that Makemoney Movies produces two new films - The Hulk and The Piano.Makemoney offers theaters the two films together at a single price but will not supply the movies separately.What do economists call this business practice?


A) predatory pricing
B) resale price maintenance
C) tying
D) leverage

E) None of the above
F) All of the above

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In a game,a dominant strategy is


A) the best strategy for a player to follow only if other players are cooperative.
B) the best strategy for a player to follow, regardless of the strategies followed by other players.
C) a strategy that must appear in every game.
D) a strategy that leads to one player's interests dominating the interests of the other players.

E) C) and D)
F) All of the above

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Ford and General Motors are considering expanding into the Vietnamese automobile market.Devise a simple prisoners' dilemma game to demonstrate the strategic considerations that are relevant to this decision.

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The answer should present two strategies...

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Table 17-9 Only two firms, Acme and Pinnacle, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $10 and zero fixed cost. Table 17-9 Only two firms, Acme and Pinnacle, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $10 and zero fixed cost. -Refer to Table 17-9.If Acme and Pinnacle operate to jointly maximize profits and agree to share the profit equally,then how much profit will each of them earn? A) $9,000 B) $8,750 C) $8,000 D) $6,750 -Refer to Table 17-9.If Acme and Pinnacle operate to jointly maximize profits and agree to share the profit equally,then how much profit will each of them earn?


A) $9,000
B) $8,750
C) $8,000
D) $6,750

E) B) and D)
F) None of the above

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A firm that practices resale price maintenance


A) has incentive to reduce competition between its retailers. Resale price maintenance can lead to more service.
B) has incentive to reduce competition between its retailers. Resale price maintenance cannot lead to more service.
C) has no incentive to reduce competition between its retailers. Resale price maintenance can lead to more service.
D) has no incentive to reduce competition between its retailers. Resale price maintenance cannot lead to more service.

E) C) and D)
F) None of the above

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Table 17-7. The table shows the demand schedule for a particular product. Table 17-7. The table shows the demand schedule for a particular product. -Refer to Table 17-7.Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market.If the marginal cost to produce this product is constant at $2 per unit,then what price will the cartel set in this market? A) $4 B) $5 C) $6 D) $7 -Refer to Table 17-7.Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market.If the marginal cost to produce this product is constant at $2 per unit,then what price will the cartel set in this market?


A) $4
B) $5
C) $6
D) $7

E) A) and D)
F) A) and B)

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