A dominant strategy is a strategy that:
A. results in the highest payoff to a player regardless of the opponents action.
B. guarantees the highest payoff given the worst possible scenario.
C. describes a set of circumstances in which no player can improve her payoff by
unilaterally changing her own strategy, given the other players strategies.
D. randomizes over two or more available actions in order to keep rivals from being
able to predict a players action.
An inferior good is a good
A. that has low quality.
B. that consumers purchase less of when their incomes are higher.
C. that consumers purchase more when their incomes are higher.
D. of high quality.
Refer to the normal-form game of price competition shown below.
What are the pure Nash equilibrium strategies for this game?
A. {(B, C)}.
B. {(A, C) and (B, D)}.
C. {(A, C)}.
D. There is no pure strategy Nash equilibrium to this game.
Which of the following is a correct statement?
A. A Nash equilibrium is always perfect.
B. A perfect equilibrium is always Nash.
C. A Nash equilibrium is always perfect in a multistage game.
D. None of the answers is correct.
Suppose both supply and demand increase. What effect will this have on the
equilibrium price?
A. It will fall.
B. It will rise.
C. It may rise or fall.
D. It will remain the same.
You have just been hired as a consultant to help a firm to decide which of three options
to take to maximize the value of the firm over the next three years. The following table
shows year-end profits for each option. Interest rates are expected to be stable at 8
percent over the next three years.
a. Discuss the difference in the profits associated with each option. Provide an example
of real-world options that might generate such profit streams.
b. Which option has the greatest present value?
Which of the following profit functions exhibits a Leontief production function?
A. = P x K0.75L0.50 – 20L – 35K
B. = P x min(2L, 5K) – 20L – 35K
C. = P x (3K + 4L) – 20L – 35K
D. = P x (3K0.5 + 4L0.5)1/0.2 – 20L – 35K
Which of the following is a profit-maximizing condition for a Cournot oligopolist?
A. MR = MC.
B. Q1 = Q2 = … = Qn.
C. P = MR.
D. All of the statements associated with this question are correct.
Along the same indifference curve, MRS is ________ as more of one good is obtained.
A. constant
B. increasing
C. decreasing
D. varying irregularly
The optimal bid for an individual participating in a first-price, sealed-bid auction with
independent private values is to bid:
A. more than the individuals valuation of the item.
B. less than the individuals valuation of the item.
C. exactly the individuals valuation of the item.
D. There is not an optimal bid strategy for all individuals when independent private
values exist.
Negotiation between the buyer and seller of a new ski boat is an example of:
A. consumer-producer rivalry.
B. consumer-consumer rivalry.
C. producer-producer rivalry.
D. None of the statements associated with this question are correct.
Suppose that there are two industries, A and B. There are five firms in industry A with
sales at $5 million, $2 million, $1 million, $1 million, and $1 million, respectively.
There are four firms in industry B with equal sales of $2.5 million for each firm. The
four-firm concentration ratio for industry B is:
A. 0.9
B. 1.0
C. 0.8
D. 0.7
When each bidder in an auction knows what the item is worth to that bidder, but does
not know the valuations of other bidders, the auction exhibits:
A. perfect information.
B. common values.
C. private values.
D. partially private values.
Selling a product below cost to gain a foothold in the market in order to eliminate the
inefficiencies introduced by lock-in is known as:
A. predatory pricing.
B. limit pricing.
C. penetration pricing.
D. the price-cost squeeze.
Suppose the production function of automobiles is given by
a. Show that the marginal product of any given quantity of labor increases as capital is
increased.
b. Suppose Japanese and U.S. automakers produce on identical isoquants with this
Cobb-Douglas production function and that labor costs are higher in Japan than in the
United States. Do autoworkers in Japan have a higher marginal product than American
autoworkers? Explain carefully.
c. Now suppose Japanese automakers produce on a different isoquant from U.S. firms,
but the prices of Japanese and American cars are identical. Do Japanese or American
autoworkers have a higher marginal product? Why?
Differentiated goods are a feature of a:
A. perfectly competitive market.
B. monopolistically competitive market.
C. monopolistic market.
D. monopolistically competitive market and monopolistic market.
You are the manager of a firm that sells its product in a monopolistically competitive
market with (inverse) demand given by P = 50 – 0.5Q. Your firms cost function is C =
40 + 5Q2. Your firms marginal revenue is:
A. P = 50 – 0.5Q.
B. P = 50 – Q.
C. P = 100 – Q.
D. There is insufficient information to determine the firms marginal revenue.