Question : 18.3   Game Theory 1) The tool that economists use to analyze : 1238892

18.3   Game Theory

1) The tool that economists use to analyze the mutual interdependence of oligopolies is

A) economies of scale.

B) the four-firm concentration ratio.

C) game theory.

D) the HHI.

E) the efficient scale.

2) Game theory is the tool that economists use to analyze strategic behavior, which is behavior that takes into account the ________ behavior of others and the mutual recognition of ________.

A) unexpected; interdependence

B) unexpected; independence

C) expected; interdependence

D) expected; independence

E) random; profit

3) Game theory is used to analyze the interactions among firms in ________.

A) oligopoly

B) perfect competition

C) monopoly

D) monopolistic competition

E) Both answers A and D are correct.

4) Economists use game theory to analyze strategic behavior, which takes into account

A) monopoly situations.

B) the expected behavior of others and the recognition of mutual interdependence.

C) the price-taking behavior of oligopolists.

D) non-price competition.

E) that increased demand decreases the market power of the firms in the market.

5) The concepts of mutual interdependence and game theory illustrate the fact that firms competing in oligopoly

A) consider the actions of the rivals before changing the price of their product.

B) ignore the actions of their rivals when considering price changes.

C) engage in frequent price changes.

D) never change prices.

E) will mutually determine the combined best outcome for all players.

6) All games have which features?

A) prices, rules, and payoffs

B) rules, markets, and prices

C) rules, strategies, and payoffs

D) rules, strategies, and costs

E) equilibrium, prices, and quantities

7) The players in a game theory situation often do not act in their joint interest because of which of the following?

A) They do not realize the benefit of cooperation.

B) Players strive to minimize their opponents’ profits.

C) Players do not understand the game and its payoffs.

D) It is not in each player’s self-interest to cooperate.

E) Players understand the game but they do not know which action(s) will benefit their joint interest.

8) A Nash equilibrium

i.is named after the Nobel prize winning economist, John Nash.

ii.occurs when each player chooses the best strategy given the strategy of the other player.

iii.must give the best possible outcome for both players.

A) i only

B) ii only

C) iii only

D) i and ii

E) ii and iii

9) A Nash equilibrium is defined as

A) making zero economic profit in the long run.

B) forming a cartel with strong penalties for cheaters.

C) relying on other game players to realize the benefit of cooperation.

D) each player taking the best possible action given the action of the other player.

E) each player taking the action that is best for all the players.

10) A Nash equilibrium occurs when each player in a game takes the ________ given the action of the other player.

A) worst possible action for himself or herself

B) best possible action for himself or herself

C) most unpredictable possible action

D) most mutually beneficial possible action

E) best possible action for the other player