Microeconomics^lOe(Parkin)

Chapter15Oligopoly

1WhatisOligopoly?

1)Anoligopolyisamarketstructureinwhichthereare

A)onlyafewbuyersbutmanysellers.

B)onlyafewsellerssellingeitheranidenticalordifferentiatedproduct.

C)manysellerssellingadifferentiatedproduct.

D)afewproductssoldbymanysellers.

Answer:B

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

2)Whichofthefollowingisadistinguishingcharacteristicofoligopoly?

A)Asmallnumberoffirmscompete.

B)Noonefirm'sactionsdirectlyaffecttheactionsoftheotherfirms.

C)Firmsarefreetoenterandexittheindustry.

D)Naturalbarrierscannotpreventtheentryofnewfirms.

Answer:A

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

3)Whenonlyasmallnumberofproducerscompetewitheachotherisadefiningcharacteristic

of

A)inelasticsupply.

B)monopolisticcompetition.

C)efficientcompetition.

D)oligopoly.

Answer:D

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

4)Inoligopolisticmarkets,

A)therearemanyfirms.

B)therearenobarrierstoentry.

C)thereareonlyafewfirms.

D)allfirmsarepricetakers.

Answer:C

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

5)Amarketstructureinwhichasmallnumberoffirmscompeteiscalled

A)amonopoly

B)asmall-numbermarket

C)anoligopoly

D)monopolisticcompetition

Answer:C

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

6)Thekeyfeatureofanoligopolyisthatthere

A)aremanybuyersandsellers.

B)isoneseller.

C)existsproductdifferentiation.

D)areonlyafewsellers.

Answer:D

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

7)Inanoligopoly

A)thereareonlyafewfirms.

B)thereisnoproductdifferentiation.

C)thereisfreeentryandexit.

D)firms*decisionsareunrelatedtoeachother.

Answer:A

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

8)Amarketstructureinwhichasmallnumberofproducerscompeteagainsteachotheris

A)monopolisticcompetition.

B)oligopoly.

C)monopoly.

D)perfectcompetition.

Answer:B

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

9)Iffirmsinanindustrydifferentiatedtheirproductsandmadeeconomicprofitsintheshort-run,

whatothercharacteristicwouldbeimportanttodetermineifthisisanoligopolyora

monopolisticallycompetitivemarket?

A)Thenumberoffirmsinthemarket.

B)Thenumberofclosesubstitutesforthegoodbeingproduced.

C)Thenumberofbuyersinthemarket.

D)Ifthegoodbeingsoldisanormalorinferiorgood.

Answer:A

Topic:Oligopoly

Skill:Recognition

Questionhistory:New10thedition

AACSB:ReflectiveThinking

10)Thedistinguishingfeaturesofoligopolyareandaintheindustry.

A)barrierstoentry;largenumberoffirms

B)nobarrierstoentry;fewfirms

C)barrierstoentry;fewfirms

D)nobarrierstoentry;largenumberoffirms

Answer:C

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

11)Oligopolyis

A)likemonopolybecausetherearebarrierstoentry.

B)likeperfectcompetitionbecauseoligopolyfirmsallsellhomogeneousgoods.

C)likemonopolisticcompetitionbecauseoligopolyfirmsallselldifferentiatedgoods

D)likeperfectcompetitionbecausetherearemanyfirmsintheindustry

Answer:A

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

12)Whichofthefollowingisadistinguishingcharacteristicofoligopoly?

A)Alargenumberoffirmscompete.

B)Noonefirm'sactionsdirectlyaffecttheactionsoftheotherfirms.

C)Firmsarefreetoenterandexittheindustry.

D)Naturalorlegalbarrierspreventtheentryofnewfirms.

Answer:D

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

13)Whichofthefollowingisadefiningcharacteristicofoligopoly?

A)barrierstoentry

B)sellingahomogeneousgood

C)sellingadifferentiatedgood

D)collusion

Answer:A

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

14)Naturaloligopolyisasituationwhere

A)thelevelofdemandcansupportonlyafewfirms.

B)thereisonlyonefirm.

C)thereareonlytwofirms.

D)therearelegalbarrierstoentry.

Answer:A

Topic:NaturalOligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

15)Anaturaloligopolycanform

A)ifthereareeconomiesofscale

B)onlyiffirmsselladifferentiatedgood

C)onlyiffirmssellahomogeneousgood

D)ifthereisonlyonefirmintheindustry

Answer:A

Topic:NaturalOligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

16)Inasmalltownthelevelofdemandiscapableofsupportingonlytwogasstations.This

marketis

A)anaturalduopoly.

B)perfectlycompetitivebecauseahomogeneousgoodisbeingsold.

C)operatingasifitwasamonopoly.

D)anexampleofmonopolisticcompetition.

Answer:A

Topic:NaturalOligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

17)Onedifferencebetweenoligopolyandmonopolisticcompetitionisthat

A)amonopolisticallycompetitiveindustryhasfewerfirms.

B)inmonopolisticcompetition,theproductsareidentical.

C)monopolisticcompetitionhasbarrierstoentry.

D)fewerfirmscompeteinoligopolythaninmonopolisticcompetition.

Answer:D

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

18)Whichofthefollowingisadistinguishingcharacteristicofoligopoly?

A)Alargenumberoffirmscompete.

B)Eachfirm'sactionsinfluencetheprofitsofalltheotherfirms.

C)Firmsarefreetoenterandexittheindustry.

D)Naturalbarrierscannotpreventtheentryofnewfirms.

Answer:B

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

19)Consideramarketinwhicheachfirmmustpredictthepriceandquantitydecisionsofother

firms,aswellashowthosepriceandquantitydecisionswillaffectthefirstfirm'srevenueand

profit.Thismarketisbestdescribedas

A)anoligopoly.

B)monopolisticcompetition.

C)amonopoly.

D)perfectcompetition.

Answer:A

Topic:Oligopoly

Skill:Recognition

Questionhistory:Modified10thedition

AACSB:ReflectiveThinking

20)Inmarketstructure,afirm'soutputdepends.

A)anoligopoly;onlyonitsownmarginalrevenueandmarginalcostcurves

B)amonopolisticallycompetitive;inpartonitscompetitors*priceandquantitydecisions

C)anoligopoly;inpartonitscompetitors1priceandquantitydecisions

D)amonopolisticallycompetitive;onlyonitsmarginalrevenuecurve

Answer:C

Topic:Oligopoly

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

21)Iffirmsinanindustrymakeoutputdecisionsthatarepartiallybasedonthepriceandoutput

decisionsoftheircompetitors,thenthesefirmsareinmarkethavewiththe

otherfirmsinthemarket.

A)anoligopoly;interdependence

B)anoligopoly;nointerdependence

C)anoligopolyormonopolisticallycompetitive;interdependence

D)amonopolisticallycompetitive;nointerdependence

Answer:A

Topic:Oligopoly

Skill:Recognition

Questionhistory:New10thedition

AACSB:ReflectiveThinking

22)Ofthefollowingmarketstructures,whichhasthefewestnumberoffirmscompetingagainst

eachother?

A)monopolisticcompetition

B)oligopoly

C)perfectcompetition

D)BothanswersAandCarecorrect.

Answer:B

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

23)Aduopolyoccurswhen.

A)thereareonlytwoproducersofaparticulargoodcompetinginthesamemarket

B)therearetwoproducersoftwogoodscompetinginanoligopolymarket

C)therearenumerousproducersoftwogoodscompetinginacompetitivemarket

D)theoneproduceroftwogoodssellsthegoodsinamonopolymarket

Answer:A

Topic:Duopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

24)Aduopolyisaformof

A)perfectcompetition.

B)monopolisticcompetition.

C)oligopoly.

D)monopoly.

Answer:C

Topic:Duopoly

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

G6

P

P

」5

<pd

S4

qJ

o3

)p

40)2

一

d」

1

0

9

8

o

4080120160200

Quantity(ridesperday)

Inthefigure,Disthedemandcurvefortaxiridesinatown,andATCistheaveragetotalcost

curveofataxicompany.

25)Inthescenarioabove,themarketis:

A)Anaturalduopoly

B)Anaturaloligopolywiththreefirms

C)Anaturalmonopoly

D)Monopolisticallycompetitive

Answer:A

Topic:Duopoly

Skill:Analytical

Questionhistory:Previousedition,Chapter15

AACSB:AnalyticalSkills

26)Inanoligopolymarket,theHerfindahl-HirschmanIndexisusually:

A)Greaterthan1,000

B)Below1,000

C)Between100and1,000

D)Between200and2,000

Answer:A

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

27)AnmarketinwhichtheHerfindahl-HirschmanIndex(HHI)is1,250isconsideredtobe

A)anoligopoly.

B)monopolisticallycompetitive.

C)amonopoly.

D)perfectlycompetitive.

Answer:A

Topic:Oligopoly

Skill:Recognition

Questionhistory:New10thedition

AACSB:ReflectiveThinking

28)Inthemarketforbatteries,thefourlargestfirmsearn90%ofthetotalrevenueandthereare

35firmsintheindustry.Thisindustryisbestdescribedas

A)oligopoly

B)monopoly

C)monopolisticcompetition

D)perfectcompetition

Answer:A

Topic:Oligopoly

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

29)Ofthefollowing,thebestexampleofoligopolyis

A)wheatfarming.

B)therestaurantindustry.

C)thecigaretteindustry.

D)theclothingindustry.

Answer:C

Topic:Oligopoly

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

30)Whenproducersagreetorestrictoutput,raisetheprice,andincreaseprofits,theagreementis

called.

A)apricingagreement

B)anoligopolyagreement

C)acollusiveagreement

D)amonopolyagreement

Answer:C

Topic:Cartel

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

31)isagroupoffirmsthathavecolludedtolimittheiroutputandraisetheirprice.

A)Acartel

B)Anoligopoly

C)Astrategy

D)Aduopoly

Answer:A

Topic:Cartel

Skill:Recognition

Questionhistory:Modified10thedition

AACSB:ReflectiveThinking

32)Whichofthefollowingischaracteristicofoligopoly,butNOTofmonopolisticcompetition?

A)Thechoicesmadebyonefirmhaveasignificanteffectonotherfirms.

B)Eachfirmfacesadownward-slopingdemandcurve.

C)Firmsareprofit-maximizers.

D)Thereismorethanonefirmintheindustry.

Answer:A

Topic:StudyGuideQuestion,Oligopoly

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

33)Amonopolisticallycompetitivefirmislikeanoligopolisticfirminsofaras

A)bothfaceperfectlyelasticdemand.

B)bothcanearnaneconomicprofitinthelongrun.

C)bothhaveMRcurvesthatliebeneaththeirdemandcurves.

D)neitherisprotectedbyhighbarrierstoentry.

Answer:C

Topic:StudyGuideQuestion,Oligopoly

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

2OligopolyGames

1)Gametheoryismostusefulforanalyzing

A)perfectcompetition.

B)monopolisticcompetition.

C)oligopoly.

D)monopoly.

Answer:C

Topic:GameTheory

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

2)Gametheorycanbeusedforstudyingwhichofthefollowingtypesofmarketstructure?

A)monopoly

B)monopolisticcompetition

C)oligopoly

D)perfectcompetition

Answer:C

Topic:GameTheory

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

3)Gametheoryismostusefulfordeterminingtheoutcomewhen.

A)themarketstructureisoligopoly

B)monopolisticcompetitionexists

C)prisontermsareinvolved

D)themarketisdominatedbyamonopoly

Answer:A

Topic:GameTheory

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

4)Gametheoryisusedtoexplainfirms*decisionsin

A)amonopoly.

B)anoligopoly.

C)aperfectlycompetitivemarket.

D)amonopolisticallycompetitivemarket.

Answer:B

Topic:GameTheory

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

5)Gametheoryisapplicabletooligopolybehaviorbecauseoligopolists

A)usestrategicbehavior.

B)ignorerivalfirms.

C)arepricetakers.

D)canonlybeprofitableiftheycollude.

Answer:A

Topic:GameTheory

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

6)Gametheoryisdistinctiveinthatitselementsare

A)costs,prices,andprofits.

B)revenues,elasticity,andprofits.

C)rules,strategies,payoffs,andoutcomes.

D)patents,copyrights,andbarrierstoentry.

Answer:C

Topic:WhatIsaGame?

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

7)Whichgroupoffeaturesissharedbyallgames?

A)rules,strategies,payoffs,outcome

B)rules,profit,payoffs,outcome

C)profit,strategies,payoffs,cheating

D)rules,cheating,payoffs,outcome

Answer:A

Topic:WhatIsaGame?

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

8)Gametheoryisatoolforstudying.

A)Nashbehavior

B)payoffdilemmas

C)rationaldilemmas

D)strategicbehavior

Answer:D

Topic:GameTheory

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

9)Ingametheory,strategiesinclude.

A)allpossibleactionsofeachplayer

B)onlythewinningactionofeachplayer

C)allpossibleactionsandpayoffsofeachplayer

D)thepayoffmatrix

Answer:A

Topic:GameTheory

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

10)Theprisoners1dilemmadescribesasingle-playgamethatfeatures

A)anoutcomeinwhichtheparticipantscollude.

B)alargenumberofrivalscooperatingwitheachother.

C)asituationinwhichoneplayerhasbetteroddsthantheother.

D)twoplayerswhoareunabletocommunicatewitheachother.

Answer:D

Topic:Prisoners'Dilemma

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

11)Thesimplestprisoners*dilemmaisagamethat,inpart,requires

A)twoplayerswhoareabletocommunicatewitheachother.

B)twoplayerswhoareunabletocommunicatewitheachother.

C)monopolisticcompetition.

D)anoligopolywithoneverylargefirm.

Answer:B

Topic:Prisoners*Dilemma

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

12)Intheprisoners'dilemmagame,eachplayer

A)hasonlyonepossiblestrategy.

B)canchoosefromtwostrategies.

C)canchoosefromthreestrategies.

D)canchoosefromfourstrategies.

Answer:B

Topic:Prisoners1Dilemma

Skill:Analytical

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

13)Inaprisoner'sdilemmagame,eachpersonwillpick

A)theirbestoutcomegivenwhattheotherpersonwilldo

B)theirbestoutcome.

C)theirworseoutcome.

D)theirbestoutcomeafterconsultingwiththeotherperson

Answer:A

Topic:NashEquilibrium

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

14)Intheprisoners1dilemmagame,wheneachplayertakesthebestpossibleactiongiventhe

actionoftheotherplayer,.

A)acompetitiveequilibriumisreached

B)oneplayerdeniesandoneplayerconfesses

C)bothplayersdeny

D)aNashequilibriumisreached

Answer:D

Topic:Prisoners'Dilemma

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

15)Theoutcomeofaprisoners*dilemmagamewithaNashequilibriumisthat.

A)bothplayersdeny

B)oneplayerdeniesandoneplayerconfesses

C)bothplayersconfess

D)thereisnoequilibrium

Answer:C

Topic:Prisoners*Dilemma

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

16)Inaprisoner'sdilemma,theNashequilibriumoccurswhere

A)neitherpersonendsupwiththeirbestoutcome

B)bothendupwiththeirbestoutcome

C)onlyoneendsupwithhisbestoutcome

D)theonewhogoesfirstendsupwithhisbestoutcome

Answer:A

Topic:Prisoners'Dilemma

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

17)Theprisoners*dilemmahasanequilibriuminwhich

A)bothplayersdeny.

B)bothplayersconfess.

C)theplayerwhoconfesseswins.

D)theplayerwhodenieswins.

Answer:B

Topic:Prisoners'Dilemma

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

18)Inaprisoners1dilemmagame,whichofthefollowingstrategiesgivesthebestoutcomefor

bothprisoners?

A)Bothdeny(collusion).

B)Bothconfess(notcollude).

C)Oneconfesseswhiletheotherdenies.

D)noneoftheabove

Answer:A

Topic:Prisoners'Dilemma

Skill:Recognition

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

19)Inaprisoners1dilemmagame,intheNashequilibrium

A)bothplayershaveanotheroutcomethatdoesnotoccurbutismorefavorable.

B)neitherplayerhasanotheroutcomethatdoesnotoccurandismorefavorable.

C)oneplayerhasanotheroutcomethatdoesnotoccurandismorefavorable.

D)collusionwouldnotaltertheoutcome.

Answer:A

Topic:Prisoners*Dilemma

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

20)Theprisoners*dilemmahasanequilibriumthatis

A)aNashequilibriumandbothplayersconfess.

B)notaNashequilibriumandbothplayersconfess.

C)aNashequilibriumandbothplayersdeny.

D)notaNashequilibriumandbothplayersdeny.

Answer:A

Topic:Prisoners'Dilemma

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:ReflectiveThinking

21)AnnandLynnhavebeenarrestedbythepolice,whohaveevidencethatwillconvictthemof

robbingabank.Ifconvicted,eachwillreceiveasentenceof6yearsfortherobbery.During

questioning,thepolicesuspectthatAnnandLynnareresponsibleforaseriesofbankrobberies.

Ifbothconfesstotheseries,eachwillreceive12yearsinjail.Ifonlyoneconfesses,shewill

receive4yearsandtheonewhodoesnotconfesswillreceive14years.Whatistheequilibrium

forthisgame?

A)bothconfess

B)AnnconfessesandLynndoesnotconfess

C)LynnconfessesandAnndoesnotconfess

D)neitherconfess

Answer:A

Topic:Prisoners'Dilemma

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:AnalyticalSkills

22)Considertheprisoner'sdilemmamodelwheretwocriminalshavetwooptions(confessor

deny),andeachcriminalmustmaketheirdecisionwithoutspeakingtotheothercriminalfirst.

Iftheybothconfesstheyeachget3years,ifonlyoneconfessesthenhegets1andhispartner

gets10,andifneitherconfessesthentheyeachget0.Theyareinfactbothguilty.Inthis

game,theNashequilibriumiswhere

A)bothconfess

B)neitheroneconfesses

C)onlyonewillconfess

D)itisimpossibletosay

Answer:A

Topic:Prisoners*Dilemma

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:AnalyticalSkills

Bob

Don't

Confess

Confess

B:10yearsB:20years

Confess

J:10yearsJ:1year

Joe

Don'tB:1yearB:2years

ConfessJ:20yearsJ:2years

23)ThetableabovedisplaysthepossibleoutcomesforBobandJoe,whohavebeenarrestedfor

armedrobberyandcartheft.Whichofthefollowingistrue?

A)IfJoeconfesses,Bobshouldnotconfess.

B)IfBobconfesses,Joeshouldconfess.

C)ThedominantequilibriumisthatJoeandBobbothserve2years.

D)IfJoedoesnotconfess,Bobshouldnotconfess.

Answer:B

Topic:Prisoners'Dilemma

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:AnalyticalSkills

PlayerA

ConfessDon'tconfess

A:3yearsA:10years

Confess

B:3yearsB:1year

PlayerB

Don'tA:1yearA:2years

confessB:10yearsB:2years

24)Thetableaboveshowsthepayoffmatrixforaprisoners*dilemmagame.TheNash

equilibriumisthat

A)bothprisonersdonotconfess.

B)bothprisonersconfess.

C)prisonerAconfesseswhileprisonerBdoesnotconfess.

D)prisonerAdoesnotconfesswhileprisonerBconfesses.

Answer:B

Topic:Prisoners1Dilemma

Skill:Analytical

Questionhistory:Previousedition,Chapter15

AACSB:AnalyticalSkills

25)Thetableaboveshowsthepayoffmatrixforaprisoners*dilemma.IntheNashequilibrium,

A)bothprisonersget3yearsinjail.

B)bothprisonersget2yearsinjail.

C)bothprisonersget1yearinjail.

D)bothprisonersget10yearsinjail.

Answer:A

Topic:Prisoners'Dilemma

Skill:Analytical

Questionhistory:Previousedition,Chapter15

AACSB:AnalyticalSkills

26)Theproblemfortheprisonersintheprisoners*dilemmagameintheabovetableisthat

A)theNashequilibriumisnotthebestoutcome.

B)thereisnoequilibriumoutcome.

C)neitherprisonerhasaworkablestrategy.

D)Noneoftheaboveanswersiscorrect.

Answer:A

Topic:Prisoners*Dilemma

Skill:Conceptual

Questionhistory:Previousedition,Chapter15

AACSB:AnalyticalSkills

Firm1

SellGiveaway

1:$31:$4

Sell

2:$32:-$1

Firm2

1:-$11:$2

Giveaway

2:$42:$2

27)Twosoftwarefirmshavedevelopedanidenticalnewsoftwareapplication.Theyaredebating

whethertogivethenewapplicationawayfreeandthenselladd-onsorselltheapplicationat$30

acopy.Thepayoffmatrixisaboveandthepayoffsareprofitsinmillionsofdollars.Whatis

Firml*sbeststrategy?

A)GiveawaytheapplicationregardlessofwhatFirm2does.

B)Selltheapplicationat$30acopyregardlessofwhatFirm2does.

C)GiveawaytheapplicationonlyifFirm2sellstheapplication.

D)GiveawaytheapplicationonlyifFirm2givesawaytheapplication.

Answer:A

Topic:GameTheory

Skill:Analytical

Questionhistory:Previousedition,Chapter15

AACSB:AnalyticalSkills

28)Twosoftwarefirmshavedevelopedanidenticalnewsoftwareapplication.Theyaredebating

whethertogivethenewapplicationawayfreeandthenselladd-onsorselltheapplicationat$30

acopy.Thepayoffmatrixisaboveandthepayoffsareprofitsinmillionsofdollars.Whatisthe

Nashequilibriumofthegame?

A)BothFirm1and2willsellthesoftwareapplicationat$3()acopy.

B)BothFirm1and2willgivethesoftwareapplicationawayfree.

C)Firm1willgivetheapplicationawayfreeandFirm2willsellitat$3().

D)ThereisnoNashequilibriumtothisgame.

Answer:B

Topic:GameTheory,NashEquilibrium

Skill:Analytical

Questionhistory:Previousedition,Chapter15

AACSB:AnalyticalSkills

Jane

Don't

Advertise

advertise

J:$6,000J:$3,000

Advertise

B:$10,000B:$20,000

Bob

Don'tJ:$12,000J$10,000

adveiliseB:$5,000B:$15,000

29)ThepayoffmatrixofeconomicprofitsabovedisplaysthepossibleoutcomesforBoband

Janewhoareinvolvedingameofwhetherornottoadvertise.Aftereachplayerchooseshisor

herbeststrategyandseestheresult,

A)onlyBobwouldliketochangehisdecision.

B)neitherplayerwouldbewillingtochangehisorherdecisionunlesstheotherplayeralso

changeshisorherdecision.

C)ifJanedoesnotchangeherdecision,Bobwouldliketochangehis.

D)ifBobdoesnotchangehisdecision,Janewouldliketochangehers.

Answer:B

Topic:GameTheory,NashEquilibrium

Skill:Analytical

Questionhistory:Previousedition,Chapter15

AACSB:AnalyticalSkills

FirmA

R&DNoR&D

A:$25A:-$3

R&D

B:$15B:$60

Firm

B

A:$60A:$5()

NoR&D

B:-$3B:$35

30)F