111) Which of the following statements is the best description of a Nash equilibrium?
A) An equilibrium outcome achieved by cooperation between players in the game.
B) An outcome where each player’s best strategy is to maintain its present behaviour given the present behaviour of the other players.
C) An outcome that is achieved when players in the game have jointly maximized profits and divided those profits according to market share of each player.
D) An outcome where each player’s strategy depends on the behaviour of its opponents.
E) An equilibrium outcome that is achieved by collusion, and no party has an incentive to change their behaviour.
112) Refer to Figure 11-4. If Allstom and Bombardier co-operated with each other when bidding on the contract, then the likely outcome is that
A) each firm bids $35 million, and earns profit of $2.5 million.
B) each firm bids $50 million, and earns profit of $10 million.
C) Bombardier bids $50 million, and earns profit of $0, while Allstom bids $35 million and earns profit of $5 million.
D) Bombardier bids $35 million, and earns profit of $5 million, while Allstom bids $50 million and earns profit of $0.
113) Refer to Figure 11-4. What is the Nash equilibrium in this bidding contest between Allstom and Bombardier?
A) The two firms will co-operate and maximize their joint profits at $10 million each.
B) Each firm will bid the high price, expecting a larger total profit.
C) Each firm will bid the low price, and each will earn a profit of $2.5 million.
D) There is no Nash equilibrium in this bidding contest, because each firm can expect to earn at least $5 million.
E) both A and C are Nash equilibrium.
114) Refer to Figure 11-4. Given the information provided in the figure, what is the cost to either firm of completing this project on its own?
A) $2.5 million
B) $5 million
C) $10 million
D) $20 million
E) $30 million
115) Refer to Table 11-2. Of the choices provided below, what is the minimum value for x in order for both firms’ cheating to be a Nash equilibrium?
A) 25
B) 40
C) 60
D) 70
E) 80
116) Refer to Table 11-2. If Firm A is indifferent between cheating or cooperating when Firm B chooses to cooperate, x must be equal to
A) 0.
B) 10.
C) 20.
D) 30.
E) 40.
117) Refer to Table 11-2. If x = 40, what is the Nash equilibrium in this game?
A) (Firm A: cooperate, Firm B: cooperate)
B) (Firm A: cooperate, Firm B: cheat)
C) (Firm A: cheat, Firm B: cooperate)
D) (Firm A: cheat, Firm B: cheat)
E) there is no Nash equilibrium for this value of x
118) Refer to Table 11-3. From the payoff matrix we can infer that
A) it is optimal for Firm A to produce 1000 units of output regardless of what Firm B is doing.
B) both firms are indifferent between an equilibrium (Produce 1000 units, Produce 1000 units) and (Produce 2000 units, Produce 2000 units).
C) it is optimal for Firm A to produce 2000 units of output regardless of what Firm B is doing.
D) it is optimal for Firm B to produce 1000 units of output regardless of what Firm A is doing.
E) there is no Nash equilibrium in the game.
119) Refer to Table 11-3. The Nash equilibrium in this game is
A) (Firm A: produce 1000 units, Firm B: produce 1000 units).
B) (Firm A: produce 2000 units, Firm B: produce 1000 units).
C) (Firm A: produce 2000 units, Firm B: produce 2000 units).
D) (Firm A: produce 1000 units, Firm B: produce 2000 units).
E) non-existent.
120) Suppose there are only two firms in an industry. If they each set a high price, they each earn $5000. If they each set a low price, they each earn $2500. If one firm sets a low price while the other sets a high price, the low-price firm earns $7000 while the high-price firm earns $1000. Does a prisoners’ dilemma exist?
A) yes, because there is always a prisoner’s dilemma in game theory
B) it cannot be determined from the information provided
C) yes, the Nash equilibrium does not maximize the joint payoff
D) no, the Nash equilibrium does not maximize the joint payoff
E) no, the Nash equilibrium does not maximize the individual payoff
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