Question :
61) When an oligopoly market in Nash equilibrium
A) firms have : 1244666
61) When an oligopoly market is in Nash equilibrium
A) firms have colluded to set their prices.
B) firms will not behave as profit maximizers.
C) a firm will not take into account the strategies of its rivals.
D) a firm will choose its best pricing strategy, given the strategies that it observes other firms have taken.
62) A game in which pursuing dominant strategies results in noncooperation that leaves all parties worse off is a
A) prisoner’s dilemma.
B) cooperative equilibrium.
C) first-price auction.
D) zero-sum game.
63) Why does a prisoner’s dilemma lead to a noncooperative equilibrium?
A) because each player had agreed before the game started to minimize the harm that he can inflict on the other players
B) because each player is uncertain how other players will play the game
C) because players must choose from a limited number of non-dominant strategies
D) because each rational player has a dominant strategy to play a certain way regardless of what other players do
64) Prisoner’s dilemma games imply that cooperative behavior between two people or two firms always breaks down. But reality teaches us that people and firms often cooperate successfully to achieve their goals. Why do the results from prisoner’s dilemma games fail to predict real world results?
A) Prisoner’s dilemma games do not permit people or firms from reneging on agreements, which often occurs in real word situations.
B) The prisoner’s dilemma does not apply to most business situations that are repeated over and over.
C) Prisoner’s dilemma games predict the behavior of people and firms that engage in illegal activity; most people and firms do not resort to illegal activity.
D) Most real world situations involve more than two people or firms; the prisoner’s dilemma is only applicable to situations that involve two parties.
Table 11-10
Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby. Both consider offering free pickup and delivery services. Table 11-10 shows the payoff matrix containing the expected quarterly profits for each firm.
65) Refer to Table 11-10. Does Ming have a dominant strategy? If yes, what is it?
A) Yes, Ming’s dominant strategy is to offer free pickup and delivery.
B) No, Ming does not a dominant strategy – his best outcome depends on what Henri does.
C) Yes, Ming’s dominant strategy is to not to offer free pickup and delivery.
D) Yes, Ming’s dominant strategy is to wait to see what Henri does first.
66) Refer to Table 11-10. Does Henri have a dominant strategy? If yes, what is it?
A) Yes, Henri’s dominant strategy is to not offer free pickup and delivery.
B) Yes, Henri’s dominant strategy is to offer free pickup and delivery.
C) No, Henri does not have a dominant strategy – his best outcome depends on what Ming does.
D) Yes, Henri’s dominant strategy is to wait and see what Ming does first.
67) Refer to Table 11-10. What is the Nash equilibrium in this game?
A) There is no Nash equilibrium.
B) Ming offers free pickup and delivery, but Henri does not.
C) Henri offers free pickup and delivery, but Ming does not.
D) Both Ming and Henri offer free pickup and delivery.
68) An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a
A) cartel equilibrium.
B) noncooperative equilibrium.
C) prisoner’s dilemma equilibrium.
D) dominant strategy equilibrium.
69) A cooperative equilibrium results when firms
A) choose the best strategy regardless of what other players do.
B) choose the strategy that maximizes the total game payoff.
C) choose the strategy that minimizes the payoff to other players.
D) choose a strategy by random chance.
Table 11-11
There are two mobile home manufacturers in Nevada, Sturdy Homes (S) and My Haven (M). Sturdy Homes has been in the market for a long time and must now compete with newcomer, My Haven. Suppose that Sturdy Homes believes that My Haven will match any price it sets. Use Table 11-11 to answer the following question and assume throughout that Sturdy Homes believes that My Haven will match any price it sets.
70) Refer to Table 11-11. What price will Sturdy Homes charge and what profit does Sturdy Homes expect to make?
A) Price = $8,000; expected profit = $7 million
B) Price = $8,000; expected profit = $4 million
C) Price = $10,000; expected profit = $5 million
D) Price = $12,000; expected profit = $3 million
Table 11-12
Perfect Plants
Perfect Plants
Don’t offer same-day delivery
Offer same-day delivery
Florabunda Florist
Don’t offer same-day delivery
Florabunda earns $1,500 million profit/Perfect earns $1,500 million profit
Florabunda earns $800 million profit/Perfect earns $1,800 million profit
Florabunda Florist
Offer same-day delivery
Florabunda earns $1,800 profit/Perfect earns $800 million profit
Florabunda earns $1,000 million profit/Perfect earns $1,000 million profit
The payoff matrix shown above assumes that Perfect Plants and Florabunda Florist must decide whether to offer same-day delivery for their products. The matrix shows how much profit each firm will earn if it does or does not offer same-day delivery. The amount of profit for one firm depends on whether the other firm offers same-day delivery.
