Question 1  1. A Prisoners Dilemma illustrates the fact that a. Rational choices can lead to inefficient outcomes b. Rational choices always leads to good outcomes c. Rational choices always lead to ...

---

Question 1 
1. A Prisoners Dilemma illustrates the fact that
a.
Rational choices can lead to inefficient outcomes
b.
Rational choices always leads to good outcomes
c.
Rational choices always lead to inefficient outcomes
d.
None of the above
2 points     
Question 2 
1. First-mover advantage is a characteristic of
a.
A simultaneous-move game
b.
A dominant strategy
c.
A sequential-move game
d.
All of the above
2 points     
Question 3 
1. Game theory assumes that players in the game act
a.
Rationally
b.
Optimally
c.
In their own self-interest
d.
All the above
2 points     
Question 4 
1. Refer to the following normal form game of price competition for questions 85 - 88.

Firm B
Low Price High Price
Firm A Low Price 0, 0 50, -10
High Price -10, 50 25, 25


What is the Nash equilibrium of this one-shot game?
a.
Firm A will charge a lower price and firm B will charge a higher price
b.
Firm A will charge a lower price and firm B will charge a lower price
c.
Firm A will charge a higher price and firm B will charge a higher price
d.
Firm A will charge a higher price and firm B will charge a lower price
3 points     
Question 5 
1. Refer to the following normal form game of price competition for questions 85 - 88.
Firm B
Low Price High Price

Firm A Low Price 0, 0 50, -10
High Price -10, 50 25, 25


What is the payoff for each firm in this simultaneous game?
a.
Firm A will earn 50 and firm B will earn -10
b.
Both firms will earn 0
c.
Firm A will earn -10 and firm B will earn 50
d.
Both firms will earn 25
3 points     
Question 6 
1. Refer to the following normal form game of price competition for questions 85 - 88.
Firm B
Low Price High Price
Firm A Low Price 0, 0 50, -10

High Price -10, 50 25, 25


Suppose this is a repeated game where the firms adopt a trigger strategy. What would the
trigger strategy look like?
a.
Charge a low price till he charges a low price, then charge a high price
b.
Charge low prices until he charges a high price, and then match
c.
Charge high prices until he charges a low price, then match
d.
Charge a high price till he charges a high price, then charge a low price
3 points     
Question 7 
1. Refer to the following normal form game of price competition for questions 85 - 88.
Firm B
Low Price High Price
Firm A Low Price 0, 0 50, -10

High Price -10, 50 25, 25


Suppose that Firm A cheats, and B does not. What is A's payoff from cheating?
a.
0
b.
-10
c.
50
d.
25
3 points     
Question 8 
1. The Nash equilibrium is
a.
a pair of strategies, one for each player, in which neither strategy is a best response
b.
a pair of strategies, one for each player , in which player B’s strategy is the best
response while player A’s is not
c.
a pair of strategies, one for each player , in which player A’s strategy is the best
response while player B’s is not
d.
a pair of strategies, one for each player, in which each player’s strategy is the
best response to the other’s
2 poi