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63. Lori and Maya are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or
not at all. If they both advertise on TV, each will earn a profit of $10,000. If they both advertise on radio, each will earn a
profit of $14,000. If neither advertises at all, each will earn a profit of $20,000. If one advertises on TV and other
advertises on radio, then the one advertising on TV will earn $16,000 and the other will earn $6,000. If one advertises on
TV and the other does not advertise, then the one advertising on TV will earn $30,000 and the other will earn $4,000. If
one advertises on radio and the other does not advertise, then the one advertising on radio will earn $24,000 and the other
will earn $8,000. If both follow their dominant strategy, then Lori will
a.
advertise on TV and earn $10,000.
b.
advertise on radio and earn $14,000.
c.
not advertise at all and earn $20,000.
d.
None of the above is correct. Lori and Maya do not have dominant strategies.
64. Juan Pablo and Zak are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on
radio, or not at all. If they both advertise on TV, each will earn a profit of $8,000. If they both advertise on radio, each will
earn a profit of $14,000. If neither advertises at all, each will earn a profit of $20,000. If one advertises on TV and other
advertises on radio, then the one advertising on TV will earn $12,000 and the other will earn $10,000. If one advertises on
TV and the other does not advertise, then the one advertising on TV will earn $22,000 and the other will earn $4,000. If
one advertises on radio and the other does not advertise, then the one advertising on radio will earn $24,000 and the other
will earn $8,000. If both follow their dominant strategy, then Juan Pablo will
a.
advertise on TV and earn $8,000.
b.
advertise on radio and earn $14,000.
c.
advertise on TV and earn $22,000.
d.
not advertise and earn $20,000.
65. George and Jerry are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio,
or not at all. If they both advertise on TV, each will earn a profit of $3,000. If they both advertise on radio, each will earn
a profit of $5,000. If neither advertises at all, each will earn a profit of $10,000. If one advertises on TV and the other
advertises on radio, then the one advertising on TV will earn $4,000 and the other will earn $2,000. If one advertises on
TV and the other does not advertise, then the one advertising on TV will earn $8,000 and the other will earn $5,000. If one
advertises on radio and the other does not advertise, then the one advertising on radio will earn $9,000 and the other will
earn $6,000. If both follow their dominant strategy, then George will
a.
advertise on TV and earn $3,000.
b.
advertise on radio and earn $5,000.
c.
advertise on TV and earn $8,000.
d.
not advertise and earn $10,000.
66. Laurel and Janet are competitors in a local market and each is trying to decide if it is worthwhile to advertise. If both
of them advertise, each will earn a profit of $5,000. If neither of them advertise, each will earn a profit of $10,000. If one
advertises and the other doesn't, then the one who advertises will earn a profit of $12,000 and the other will earn $2,000.
In this version of the prisoners' dilemma, if the game is played only once, Laurel should
a.
advertise, but if the game is to be repeated many times she should probably not advertise.
b.
advertise, and if the game is to be repeated many times she should still probably advertise.
c.
not advertise, but if the game is to be repeated many times she should probably advertise.
d.
not advertise, and if the game is to be repeated many times she should still not advertise.
Table 17-14
This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff
to B).
B
Left
Right
A
Up
(4, 4)
(6, 2)
Down
(2, 6)
(0, 0)
67. Refer to Table 17-14. If player A chooses his/her best strategy, player B should
a.
choose left and earn a payoff of 4.
b.
choose left and earn a payoff of 6.
c.
choose right and earn a payoff of 2.
d.
choose right and earn a payoff of 0.
68. Refer to Table 17-14. If both players choose their best strategies, player A will earn a payoff of
a.
0.
b.
2.
c.
4.
d.
6.
69. Refer to Table 17-14. Which of the following statements about this game is true?
a.
Up is a dominant strategy for A and Right is a dominant strategy for B.
b.
Up is a dominant strategy for A and Left is a dominant strategy for B.
c.
Down is a dominant strategy for A and Right is a dominant strategy for B.
d.
Down is a dominant strategy for A and Left is a dominant strategy for B.
70. Refer to Table 17-14. Which outcome is the Nash equilibrium in this game?
a.
Up-Right
b.
Up-Left
c.
Down-Right
d.
Down-Left
Table 17-15
This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff
to B).
B
71. Refer to Table 17-15. If player B chooses Right, player A should choose
a.
Up and earn a payoff of 1.
b.
Middle and earn a payoff of 5.
c.
Middle and earn a payoff of 7.
d.
Down and earn a payoff of 4.
72. Refer to Table 17-15. Which of the following statements regarding this game is true?
a.
Both players have a dominant strategy.
b.
Player A has a dominant strategy, but player B does not have a dominant strategy.
c.
Player A does not have a dominant strategy, but player B does have a dominant strategy.
d.
Neither player has a dominant strategy.
73. Refer to Table 17-15. Which of the following outcomes represents a Nash equilibrium in the game?
a.
Up-Center
b.
Middle-Right
c.
Down-Left
d.
Down-Center
Table 17-16
This table shows a game played between two players, A and B. The payoffs are given in the table as (Payoff to A, Payoff
74. Refer to Table 17-16. Which of the following statements is true regarding this game?
a.
Both players have a dominant strategy.
b.
Neither player has a dominant strategy.
c.
A has a dominant strategy, but B does not have a dominant strategy.
d.
B has a dominant strategy, but A does not have a dominant strategy.
75. Refer to Table 17-16. Which of the following outcomes represents a Nash equilibrium in the game?
a.
Middle-Center
b.
Down-Center
c.
Up-Left
d.
More than one of the above is a Nash equilibrium in this game.
Table 17-17
This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much
output (Q) to produce: 2 units or 3 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm
B).
Firm B
Q=2
Q=3
Firm A
Q=2
(10, 10)
(8, 12)
Q=3
(12, 8)
(6, 6)
76. Refer to Table 17-17. In this game,
a.
neither player has a dominant strategy.
b.
both players have a dominant strategy.
c.
Firm A has a dominant strategy, but Firm B does not have a dominant strategy.
d.
Firm B has a dominant strategy, but Firm A does not have a dominant strategy.
77. Refer to Table 17-17. Which of the following outcomes represent the Nash equilibrium in this game?
a.
Q=2 for Firm A and Q=3 for Firm B.
b.
Q=3 for Firm A and Q=2 for Firm B.
c.
There is no Nash equilibrium in this game since neither player has a dominant strategy.
d.
Both a and b are correct.
Table 17-18
This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much
output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for
Firm B).
Firm B
Q=10
Q=12
Firm A
Q=10
(48, 48)
(20, 60)
Q=12
(60, 20)
(38, 38)
78. Refer to Table 17-18. The dominant strategy For Firm A is to produce
a.
10 units and the dominant strategy for Firm B is to produce 10 units.
b.
10 units and the dominant strategy for Firm B is to produce 12 units.
c.
12 units and the dominant strategy for Firm B is to produce 10 units.
d.
12 units and the dominant strategy for Firm B is to produce 12 units.
79. Refer to Table 17-18. The Nash equilibrium for this game is
a.
10 units of output for Firm A and 10 units of output for Firm B.
b.
10 units of output for Firm A and 12 units of output for Firm B.
c.
12 units of output for Firm A and 10 units of output for Firm B.
d.
12 units of output for Firm A and 12 units of output for Firm B.
80. Refer to Table 17-18. If these two firms agree to cooperate to maximize their joint profit, the outcome of the game
will be
a.
10 units of output for Firm A and 10 units of output for Firm B.
b.
10 units of output for Firm A and 12 units of output for Firm B.
c.
12 units of output for Firm A and 10 units of output for Firm B.
d.
12 units of output for Firm A and 12 units of output for Firm B.
81. Refer to Table 17-18. If these two firms play this game repeatedly, the likely outcome will be
a.
10 units of output for Firm A and 10 units of output for Firm B.
b.
10 units of output for Firm A and 12 units of output for Firm B.
c.
12 units of output for Firm A and 10 units of output for Firm B.
d.
12 units of output for Firm A and 12 units of output for Firm B.
82. The prisoners' dilemma game
a.
is a situation in which two players both have dominant strategies which lead to the highest total payoff for the
two players.
b.
has no Nash equilibrium since players, after agreeing to play their dominant strategy, will have an incentive to
switch to another strategy.
c.
has a Nash equilibrium, but the Nash equilibrium outcome is not the outcome the players would agree to if
they could cooperate with each other.
d.
Both a and c are correct.
83. In a prisoners' dilemma game,
a.
the solution when playing the game once will be the same as the solution when the players play the game
repeatedly, since agreements cannot be maintained in a prisoners' dilemma.
b.
if the players play the game repeatedly, the players can achieve a higher payoff, on average, than when they
play the game only once.
c.
repeated play will always result in a better outcome for both players than when the game is played only once.
d.
the tit-for-tat strategy in repeated play requires players to always select the opposite strategy as their opponent.
Table 17-19
Consider a small town that has two grocery stores from which residents can choose to buy a loaf of bread. The store
owners each must make a decision to set a high bread price or a low bread price. The payoff table, showing profit per
week, is provided below. The profit in each cell is shown as (Store 1, Store 2).
Store 2
Low Price
High Price
Store 1
Low Price
(250, 250)
(400, 50)
High Price
(50, 400)
(325, 325)
84. Refer to Table 17-19. If grocery store 2 sets a low price, what price should grocery store 1 set? And what will grocery
store 1's payoff equal?
a.
Low price, $250
b.
High price, $400
c.
Low price, $50
d.
High price, $50
85. Refer to Table 17-19. If grocery store 2 sets a high price, what price should grocery store 1 set? And what will
grocery store 1's payoff equal?
a.
Low price, $400
b.
High price, $325
c.
Low price, $50
d.
High price, $400
86. Refer to Table 17-19. If grocery store 1 sets a low price, what price should grocery store 2 set? And what will grocery
store 2's payoff equal?
a.
Low price, $250
b.
High price, $400
c.
Low price, $50
d.
High price, $325
87. Refer to Table 17-19. If grocery store 1 sets a high price, what price should grocery store 2 set? And what will
grocery store 2's payoff equal?
a.
Low price, $400
b.
High price, $50
c.
Low price, $250
d.
High price, $325
88. Refer to Table 17-19. What is grocery store 1's dominant strategy?
a.
Grocery store 1 does not have a dominant strategy.
b.
Grocery store 1 should always set a low price.
c.
Grocery store 1 should always set a high price.
d.
Grocery store 1 should set a low price when grocery store 2 sets a low price, and grocery store 1 should set a
high price when grocery store 2 sets a high price.
89. Refer to Table 17-19. What is grocery store 2's dominant strategy?
a.
Grocery store 2 does not have a dominant strategy.
b.
Grocery store 2 should always set a low price.
c.
Grocery store 2 should always set a high price.
d.
Grocery store 2 should set a low price when grocery store 1 sets a low price, and grocery store 2 should set a
high price when grocery store 1 sets a high price.
90. Refer to Table 17-19. What is the Nash Equilibrium of this price-setting game?
a.
Grocery store 1: Low price
Grocery store 2: Low price
b.
Grocery store 1: Low price
Grocery store 2: High price
c.
Grocery store 1: High price
Grocery store 2: How price
d.
Grocery store 1: High price
Grocery store 2: High price
91. Refer to Table 17-20. If Maddie chooses to clean, then Nadia will
a.
clean and Maddie’s payoff will be 30.
b.
not clean and Maddie’s payoff will be 7.
c.
clean and Maddie’s payoff will be 50.
d.
not clean and Maddie’s payoff will be 10.
92. Refer to Table 17-20. If Maddie chooses not to clean, then Nadia will
a.
clean, and Nadia’s payoff will be 50.
b.
not clean, and Nadia’s payoff will be 10.
c.
clean, and Nadia’s payoff will be 7.
d.
not clean, and Nadia’s payoff will be 30.
93. Refer to Table 17-20. If Nadia chooses to clean, then Maddie will
a.
clean, and Maddie’s payoff will be 30.
b.
not clean, and Maddie’s payoff will be 50.
c.
clean, and Maddie’s payoff will be 7.
d.
not clean, and Maddie’s payoff will be 10.
94. Refer to Table 17-20. If Nadia chooses to not clean, then Maddie will
a.
clean, and Maddie’s payoff will be 10.
b.
not clean, and Maddie’s payoff will be 50.
c.
clean, and Maddie’s payoff will be 30.
d.
not clean, and Maddie’s payoff will be 10.
95. Refer to Table 17-20. What is Nadia's dominant strategy?
a.
Nadia has no dominant strategy.
b.
Nadia should always choose Clean.
c.
Nadia should always choose Don’t Clean.
d.
Nadia has two dominant strategies, Clean and Don’t Clean, depending on the choice Maddie makes.
96. Refer to Table 17-20. What is Maddie's dominant strategy?
a.
Maddie has no dominant strategy.
b.
Maddie should always choose Clean.
c.
Maddie should always choose Don’t Clean.
d.
Maddie has two dominant strategies, Clean and Don’t Clean, depending on the choice Nadia makes.
97. Refer to Table 17-20. What is the Nash Equilibrium in this dorm room cleaning game?
a.
Nadia: Clean
Maddie: Clean
b.
Nadia: Don't Clean
Maddie: Clean
c.
Nadia: Clean
Maddie: Don't Clean
d.
Nadia: Don't Clean
Maddie: Don't Clean
Figure 17-3. Hector and Bart are roommates. On a particular day, their apartment needs to be cleaned. Each person has to
decide whether to take part in cleaning. At the end of the day, either the apartment will be completely clean (if one or both
roommates take part in cleaning), or it will remain dirty (if neither roommate cleans). With happiness measured on a scale
of 1 (very unhappy) to 10 (very happy), the possible outcomes are as follows:
98. Refer to Figure 17-3. The dominant strategy for Hector is to
a.
clean, and the dominant strategy for Bart is to clean.
b.
clean, and the dominant strategy for Bart is to refrain from cleaning.
c.
refrain from cleaning, and the dominant strategy for Bart is to clean.
d.
refrain from cleaning, and the dominant strategy for Bart is to refrain from cleaning.
99. Refer to Figure 17-3. In pursuing his own self-interest, Bart will
a.
refrain from cleaning whether or not Hector cleans.
b.
clean only if Hector cleans.
c.
clean only if Hector refrains from cleaning.
d.
clean whether or not Hector cleans.
100. Refer to Figure 17-3. If this game is played only once, then the most likely outcome is that
a.
Hector and Bart both clean.
b.
Hector cleans and Bart does not clean.
c.
Bart cleans and Hector does not clean.
d.
neither Hector nor Bart cleans.
101. Refer to Figure 17-3. In pursuing his own self-interest, Hector will
a.
refrain from cleaning whether or not Bart cleans.
b.
clean only if Bart cleans.
c.
clean only if Bart refrains from cleaning.
d.
clean whether or not Bart cleans.
102. Refer to Figure 17-3. The possible outcome in which both Hector and Bart clean is analogous to which of the
following outcomes of the duopoly game?
a.
The duopolists collude to achieve the monopoly outcome.
b.
The duopolists collude to achieve the monopolistically-competitive outcome.
c.
The outcome is the one that is most preferable for consumers of the duopolists’ product.
d.
The outcome is the one that is least preferable for both the duopolists and for the consumers of their product.
Figure 17-4. Aaron and Ed are roommates. After a big snowstorm, their driveway needs to be shoveled. Each person has
to decide whether to take part in shoveling the driveway. At the end of the day, either the driveway will be shoveled (if
one or both roommates take part in shoveling), or it will remain unshoveled (if neither roommate shovels). With happiness
measured on a scale of 1 (very unhappy) to 10 (very happy), the possible outcomes are as follows:
103. Refer to Figure 17-4. The dominant strategy for Ed is to
a.
shovel, and the dominant strategy for Aaron is to shovel.
b.
shovel, and the dominant strategy for Aaron is to refrain from shoveling.
c.
refrain from shoveling, and the dominant strategy for Aaron is to shovel.
d.
refrain from shoveling, and there is no dominant strategy for Aaron.
104. Refer to Figure 17-4. If this game is played only once, then which of the following outcomes is the most likely one?
a.
Aaron and Ed both shovel.
b.
Aaron shovels and Ed does not shovel.
c.
Ed shovels and Aaron does not shovel.
d.
All of the above outcomes are equally likely.
105. Refer to Figure 17-4. In pursuing his own self-interest, Ed will
a.
refrain from shoveling whether or not Aaron shovels.
b.
shovel only if Aaron shovels.
c.
shovel only if Aaron refrains from shoveling.
d.
shovel whether or not Aaron shovels.
106. Refer to Figure 17-4. In pursuing his own self-interest, Aaron will
a.
refrain from shoveling whether or not Ed shovels.
b.
shovel only if Ed shovels.
c.
shovel only if Ed refrains from shoveling.
d.
shovel whether or not Ed shovels.
Table 17-21
The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and
Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not
turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below.
The payoffs are shown as (John, Paul).
Paul
Turn
Drive Straight
John
Turn
(10, 10)
(5, 20)
Drive Straight
(20, 5)
(0, 0)
107. Refer to Table 17-21. If Paul chooses Turn, what will John choose to do and what will John’s payoff equal?
a.
Turn, 10
b.
Drive Straight, 20
c.
Turn, 5
d.
Drive Straight, 0
108. Refer to Table 17-21. If Paul chooses Drive Straight, what will John choose to do and what will John’s payoff
equal?
a.
Turn, 5
b.
Drive Straight, 0
c.
Turn, 20
d.
Drive Straight, 5
109. Refer to Table 17-21. If John chooses Turn, what will Paul choose to do and what will Paul's payoff equal?
a.
Turn, 10
b.
Drive Straight, 20
c.
Turn, 5
d.
Drive Straight, 0
110. Refer to Table 17-21. If John chooses Drive Straight, what will Paul choose to do and what will Paul's payoff equal?
a.
Turn, 5
b.
Drive Straight, 0
c.
Turn, 10
d.
Drive Straight, 200
111. Refer to Table 17-21. What is Paul's dominant strategy?
a.
Paul has no dominant strategy.
b.
Paul should always choose Turn.
c.
Paul should always choose Drive Straight.
d.
Paul has more than one dominant strategy.
112. Refer to Table 17-21. What is John's dominant strategy?
a.
John has no dominant strategy.
b.
John should always choose Turn.
c.
John should always choose Drive Straight.
d.
John has two dominant strategies.
113. Refer to Table 17-21. How many Nash equilibria are there in this Chicken game?
a.
0
b.
1
c.
2
d.
3
114. Refer to Table 17-21. What is (are) the Nash equilibrium (equilibria) in this Chicken game?
a.
John: Turn
Paul: Turn
b.
John: Turn
Paul: Drive Straight
c.
John: Drive Straight
Paul: Turn
d.
Both b and c are Nash equilibria
115. In the prisoners’ dilemma,
a.
the prisoners easily collude in order to achieve the best possible payoff for both.
b.
only one player has a dominant strategy.
c.
when each player chooses his dominant strategy the players achieve the best joint outcome.
d.
when each player chooses his dominant strategy the players reach a Nash equilibrium.
116. In the game in which two oil companies own adjacent oil fields, the companies will not use the oil efficiently because
a.
neither company has a dominant strategy in the game.
b.
the companies collude and produce a quantity of oil that is less than the socially-efficient quantity.
c.
the pool from which they recover the oil is a common resource.
d.
the pool from which they recover the oil is not large enough to allow both companies to earn a positive profit.
117. An equilibrium occurs in a game when
a.
price equals marginal cost.
b.
quantity supplied equals quantity demanded.
c.
all independent strategies counterbalance all dominant strategies.
d.
all players follow a strategy that they have no incentive to change.
