Question 1

The table given below represents the payoff matrix of firms A and B,when they choose to produce either high output or low output.In each cell,the figure on the left indicates Firm B's payoffs and the figure on the right indicates Firm A's payoffs. 
-If X = 10 and Y = 15,then which of the following conclusions can be drawn from the information given in Table 14-3?

Accepted Answer

A)  The game has a Nash equilibrium and a dominant-strategy equilibrium.
B)  The game has a Nash equilibrium but not a dominant-strategy equilibrium.
C)  The game does not have a Nash equilibrium but has a dominant-strategy equilibrium.
D)  The game has neither a Nash equilibrium nor a dominant-strategy equilibrium.E) C) and D)
F) A) and C)

Question 2

Group health plans,that offer policies covering all of a firm's employees,can partly address the adverse selection problem by:

Accepted Answer

A)  increasing the incentive to take care of one's health.
B)  reducing the likelihood that high-risk people will be overrepresented.
C)  limiting the coverage provided to people with existing health problems.
D)  increasing the probability of a person falling sick.E) B) and D)
F) C) and D)

Question 3

Adverse selection describes a situation in which:

Accepted Answer

A)  the buyers of insurance consistently make the wrong decision and buy too much insurance.
B)  insurance companies find most of their customers coming from high risk groups.
C)  insurance companies find most of their customers coming from low risk groups.
D)  the buyers of insurance can reduce the probability of occurrence of the risky event against which they are insured.E) A) and B)
F) B) and C)

Question 4

Assume that Hines Corporation and Lamb Inc. ,each produce a homogeneous product and that the two firms are the only two sellers in the market.The two firms have agreed to a collusive price agreement and expect demand and cost conditions to remain unchanged over time.If the pricing game is repeated indefinitely and Hines knows that Lamb is playing a tit-for-tat strategy,then Hines' best strategy is to:

Accepted Answer

A)  cut price in every period.
B)  cut price in alternate periods.
C)  comply with the agreement.
D)  increase price in alternative periods.E) B) and C)
F) A) and D)

Question 5

Fred was suffering from a nasal tissue blockage that could be corrected either through an operation or with medical treatment for about two months.Fred's doctor clearly told him that the condition was not acute and he did not need surgery.Fred,however,insisted on the surgical removal of the blockage,being aware that his medical insurance would cover the entire cost of this surgery.The situation described here can be associated with which of the following problems?

Accepted Answer

A)  Price dispersion
B)  Moral hazard
C)  Lemons problem
D)  Prisoner's dilemmaE) B) and C)
F) A) and D)

Question 6

Advertising is profitable for a firm when:

Accepted Answer

A)  it increases search costs for the consumers of the firm's product.
B)  it raises the price of the good being advertised.
C)  it makes the demand for the firm's product more inelastic.
D)  it reduces the barriers to the entry of new firms.E) B) and D)
F) A) and D)

Question 7

Which of the following is a benefit of advertising on the Internet?

Accepted Answer

A)  It reduces the producer's cost of production.
B)  It lowers the true price consumers pay for the product by reducing consumers' search costs.
C)  It increases the supply of the product in the market and lowers its money price.
D)  It reduces the deadweight loss in the market.E) B) and C)
F) B) and D)

Question 8

Higher-priced products exhibit less relative price dispersion because:

Accepted Answer

A)  consumers do more research on goods they really like.
B)  the high price alone signals that the product is of good quality.
C)  consumers do more research on more expensive goods.
D)  producers invest heavily in the advertisement and promotion of such products.E) A) and B)
F) B) and C)

Question 9

The table given below represents the payoff matrix of firms A and B,when they choose to produce either high output or low output.In each cell,the figure on the left indicates Firm B's payoffs and the figure on the right indicates Firm A's payoffs. 
-If X = 10 and Y = 15,then from the information in Table 14-3 we can say that:

Accepted Answer

A)  the payoff matrix represents a prisoner's dilemma game.
B)  the game has a dominant-strategy equilibrium.
C)  the game has a Nash equilibrium.
D)  the payoff matrix represents a Cournot oligopoly.E) B) and C)
F) C) and D)

Question 10

The table given below represents the payoff matrix of firms A and B,when they choose to produce either high output or low output.In each cell,the figure on the left indicates Firm B's payoffs and the figure on the right indicates Firm A's payoffs. 
-If X = 15 and Y = 10,then the information in Table 14-3 implies that:

Accepted Answer

A)  the dominant strategy for Firm A would be to produce low output.
B)  the dominant strategy for Firm B would be to produce high output.
C)  the dominant strategy for both Firm A and Firm B would be to produce high output.
D)  neither Firm A nor Firm B has any dominant strategy.E) A) and B)
F) B) and D)

Question 11

All-you-can-eat restaurants tend to attract "undesirable" customers,i.e. ,mostly people who overeat.According to this statement,the problem encountered by such restaurants can be described as:

Accepted Answer

A)  a prisoner's dilemma.
B)  a moral hazard.
C)  an adverse selection.
D)  an agency dilemma.E) A) and B)
F) B) and C)

Question 12

Which of the following terms is used in the medical insurance industry to describe the percentage of the hospital bill borne by the patient?

Accepted Answer

A)  Premium
B)  Deductible
C)  Coinsurance rate
D)  Coverage rateE) C) and D)
F) A) and C)

Question 13

Which of the following is true of a prisoner's dilemma game?

Accepted Answer

A)  It does not have an equilibrium.
B)  It has a dominant-strategy equilibrium.
C)  It does not have a Nash equilibrium.
D)  It ensures better payoffs to the players compared to other games.E) B) and D)
F) A) and C)

Question 14

The three most common elements in game theory models are:

Accepted Answer

A)  players,strategies,and payoffs.
B)  labor,capital,and returns.
C)  price,output,and profit.
D)  firms,inputs,and output.E) A) and B)
F) C) and D)

Question 15

The prisoner's dilemma illustrates a situation in which:

Accepted Answer

A)  neither player has a dominant strategy,hence at equilibrium both are better off.
B)  the Nash equilibrium is superior to the dominant-strategy equilibrium.
C)  each oligopolist behaves as if it were a perfectly competitive firm.
D)  each player pursuing his/her self-interest generates a collective outcome that is inferior for both.E) C) and D)
F) None of the above

Question 16

The "live and let live" policy was followed by the soldiers in the trenches during World War I despite the passions of battle and the military logic of "kill or be killed".The cooperative equilibrium that emerged among the rivals in this situation is an example of:

Accepted Answer

A)  a single-period Nash equilibrium.
B)  a dominant strategy.
C)  a winning strategy.
D)  a repeated-game prisoner's dilemma.E) A) and B)
F) None of the above

Question 17

The table given below shows the payoffs to Firm A and Firm B if they choose to produce either high output or low output.In each cell,the figure on the left indicates Firm A's payoffs and the figure on the right indicates Firm B's payoffs. 
-Refer to the payoff matrix in Table 14-1 and identify the Nash equilibrium.

Accepted Answer

A)  Both firms produce low output
B)  Both firms produce high output
C)  Firm A produces low output and Firm B produces high output
D)  Firm A produces high output and Firm B produces low outputE) A) and C)
F) A) and B)

Question 18

The table given below represents the payoff matrix of firms A and B,when they choose to produce low or high output.In each cell,the figure on the left indicates Firm B's payoffs and the figure on the right indicates Firm A's payoffs. 
-Refer to Table 14-2.Which of the following statements about the two firms must be true?

Accepted Answer

A)  If Firm B produces low output,Firm A will also produce low output.
B)  If Firm B produces high output,Firm A will produce low output.
C)  If Firm A produces high output,Firm B will also produce high output.
D)  If Firm A produces low output,Firm B will produce high output.E) B) and C)
F) A) and B)

Question 19

Firms that produce and sell technologically advanced products in a market make additional efforts to develop a good reputation and a brand name.This is because:

Accepted Answer

A)  the brand name alone is sufficient to boost sales every year.
B)  the brand name makes a firm's product perfectly price elastic.
C)  the brand name lowers a firm's cost of production in the long run.
D)  the brand name provides reliable information about the quality of the firm's product.E) A) and B)
F) A) and C)

Question 20

The table given below describes the payoffs to Jack and Jill when each chooses to produce rock,scissors,or paper.The payoff matrix indicates the dollar payments from the loser to the winner.
Table 14-4 
-Which of the following can be concluded from the information given in Table 14-4?

Accepted Answer

A)  Jill has a dominant strategy but Jack does not.
B)  Jack has a dominant strategy but Jill does not.
C)  Neither Jack nor Jill has any dominant strategy.
D)  Each outcome or strategic choice benefits the two players equally.E) A) and D)
F) B) and C)

Exam 14: Game Theory and the Economics of Information

Which of the following terms is used in the medical insurance industry to describe the percentage of the hospital bill borne by the patient?

Correct Answer
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Correct Answer
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Which of the following is true of a prisoner's dilemma game?

Correct Answer
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Higher-priced products exhibit less relative price dispersion because:

Correct Answer
verified

Correct Answer
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The three most common elements in game theory models are:

Correct Answer
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Correct Answer
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Firms that produce and sell technologically advanced products in a market make additional efforts to develop a good reputation and a brand name.This is because:

Correct Answer
verified

The prisoner's dilemma illustrates a situation in which:

Correct Answer
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Correct Answer
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Group health plans,that offer policies covering all of a firm's employees,can partly address the adverse selection problem by:

Correct Answer
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Correct Answer
verified

Correct Answer
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All-you-can-eat restaurants tend to attract "undesirable" customers,i.e. ,mostly people who overeat.According to this statement,the problem encountered by such restaurants can be described as:

Correct Answer
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The "live and let live" policy was followed by the soldiers in the trenches during World War I despite the passions of battle and the military logic of "kill or be killed".The cooperative equilibrium that emerged among the rivals in this situation is an example of:

Correct Answer
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The table given below describes the payoffs to Jack and Jill when each chooses to produce rock,scissors,or paper.The payoff matrix indicates the dollar payments from the loser to the winner. Table 14-4 -Which of the following can be concluded from the information given in Table 14-4?

Correct Answer
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Which of the following is a benefit of advertising on the Internet?

Correct Answer
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Adverse selection describes a situation in which:

Correct Answer
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Correct Answer
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Advertising is profitable for a firm when:

Correct Answer
verified

Exam 14: Game Theory and the Economics of Information

Which of the following terms is used in the medical insurance industry to describe the percentage of the hospital bill borne by the patient?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true of a prisoner's dilemma game?

Correct AnswerverifiedShow Answer

Higher-priced products exhibit less relative price dispersion because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The three most common elements in game theory models are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Firms that produce and sell technologically advanced products in a market make additional efforts to develop a good reputation and a brand name.This is because:

Correct AnswerverifiedShow Answer

The prisoner's dilemma illustrates a situation in which:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Group health plans,that offer policies covering all of a firm's employees,can partly address the adverse selection problem by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

All-you-can-eat restaurants tend to attract "undesirable" customers,i.e. ,mostly people who overeat.According to this statement,the problem encountered by such restaurants can be described as:

Correct AnswerverifiedShow Answer

The "live and let live" policy was followed by the soldiers in the trenches during World War I despite the passions of battle and the military logic of "kill or be killed".The cooperative equilibrium that emerged among the rivals in this situation is an example of:

Correct AnswerverifiedShow Answer

The table given below describes the payoffs to Jack and Jill when each chooses to produce rock,scissors,or paper.The payoff matrix indicates the dollar payments from the loser to the winner. Table 14-4 -Which of the following can be concluded from the information given in Table 14-4?

Correct AnswerverifiedShow Answer

Which of the following is a benefit of advertising on the Internet?

Correct AnswerverifiedShow Answer

Adverse selection describes a situation in which:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Advertising is profitable for a firm when:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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