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Homework answers / question archive / Florida international university – ECO 2023 1)Suppose there is a game with two players, Player 1 and Player 2

Florida international university – ECO 2023 1)Suppose there is a game with two players, Player 1 and Player 2

Economics

Florida international university – ECO 2023

1)Suppose there is a game with two players, Player 1 and Player 2. Each player has two strategies, Player 1 can play either "Up" or "Down," while Player 2 can play "Left" or "Right." The payoffs (π) for each player under the four possible outcomes of the game are as follows:

P1 plays Up (π=4) & P2 plays Left (π=20),
P1 plays Up (π=1) & P2 plays Right (π=16),
P1 plays Down (π=8) & P2 plays Left (π=10),
P1 plays Down (π=2) & P2 plays Right (π=12).

If the Players play a simultaneous move game, what is Player 1's dominant strategy?

   

I <3 ZOMBIES.

   

Play Down.

   

Play Up.

   

No dominant strategy for Player 1.

 

  1. Economic efficiency in a free market occurs when
   

producer surplus is maximized.

   

price is as low as possible.

   

the sum of consumer surplus and producer surplus is maximized.

   

consumer surplus is maximized.

 

 

 

  1. A Nash equilibrium is:
   

a nondominant strategy.

   

an example of a cooperative equilibrium.

   

where each player chooses its best strategy, given the strategies chosen by the other players.

   

where demand and supply intersect.

 

  1. A merger between a health insurance provider and a hospital would be an example of a
   

conglomerate merger.

   

horizontal merger.

   

vertical merger.

   

conspiracy in restraint of trade.

  1.  The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit. Based on the diagram in the figure,
   

Y represents the gain (output effect) and X the loss (price effect).

   

X + Z represents the loss (output effect) and Y the gain (price effect).

   

X represents the gain (price effect) and Y the loss (output effect).

   

X represents the loss (price effect) and Y + Z the gain (output effect).

 

  1. Compared to perfect competition, the consumer surplus in a monopoly
   

is lower because price is higher and output is lower.

   

is eliminated.

   

is higher because price is higher and output is the same.

   

is unchanged because price and output are the same.

 

  1. Suppose there is a game with two players, Player 1 and Player 2. Each player has two strategies, Player 1 can play either "Up" or "Down," while Player 2 can play "Left" or "Right." The payoffs (π) for each player under the four possible outcomes of the game are as follows:

    P1 plays Up (π=4) & P2 plays Left (π=20),
    P1 plays Up (π=1) & P2 plays Right (π=16),
    P1 plays Down (π=8) & P2 plays Left (π=10),
    P1 plays Down (π=2) & P2 plays Right (π=12).

    What is the Nash equilibrium of the game if the players move simultaneously?
   

ZOMBIETACULAR

   

Right, Down

   

Up, Right

   

Down, Right

 

  1. Suppose there is a game with two players, Player 1 and Player 2. Each player has two strategies, Player 1 can play either "Up" or "Down," while Player 2 can play "Left" or "Right." The payoffs (π) for each player under the four possible outcomes of the game are as follows:

    P1 plays Up (π=4) & P2 plays Left (π=20),
    P1 plays Up (π=1) & P2 plays Right (π=16),
    P1 plays Down (π=8) & P2 plays Left (π=10),
    P1 plays Down (π=2) & P2 plays Right (π=12).

    If the Players play a simultaneous move game, what is Player 2's dominant strategy?
   

Play Right.

   

ZOMBIELICIOUS.

   

No dominant strategy for Player 2.

   

Play Left.

 

  1. A dominant strategy in a game theory analysis of oligopoly behavior is:
   

colluding with rivals to maximize joint profits.

   

deciding what to do after all rivals have chosen their own strategies.

   

the strategy that a firm is forced into following by government policy.

   

a strategy that is the best for a firm, no matter what strategies other firms use.

 

  1. If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue, total cost is $1,674 and total revenue is $2,000, its average profit is:
   

$6.52.

   

$40.

   

$326.

   

impossible to determine without additional information.

  1. What is the profit-maximizing rule for a monopolistically competitive firm?
   

to produce a quantity that maximizes market share

   

to produce a quantity that maximizes total revenue

   

to produce a quantity such that marginal revenue equals marginal cost

   

to produce a quantity such that price equals marginal cost

 

  1. A prisoners' dilemma leads to a:
   

competitive equilibrium.

   

noncompetitive equilibrium.

   

noncooperative equilibrium.

   

cooperative equilibrium.

 

  1. For a monopolistically competitive firm, marginal revenue
   

equals the price.

   

and price are unrelated.

   

is greater than the price.

   

is less than the price.

 

  1. When a monopolistically competitive firm cuts its price to increase its sales, it experiences a gain in revenue due to the
   

income effect.

   

output effect.

   

price effect.

   

substitution effect.

 

  1. The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair. It sells 8 pairs of jeans per day at a price of $90 per pair. The marginal revenue of the eighth pair of jeans is
   

$10.

   

$20.

   

$90.

   

$100.

 

  1. Game theory is useful in analyzing oligopoly behavior because:
   

trying to maximize profits is essentially a game in all types of markets.

   

it explains why oligopolies fail to make persistent profits.

   

interaction among a few large firms are what determines the level of profits.

   

advertising is so common among oligopoly firms.

 

  1. A monopolistically competitive market is described as one in which there are
   

a large number of firms selling similar, but not identical, products.

   

a few firms producing an identical product.

   

a few firms producing differentiated products.

   

one large firm and many small firms producing identical products.

 

                    

  1. In the long run, a typical monopolistically competitive firm will:
   

breakeven.

   

earn an economic profit.

   

incur an economic loss.

   

shut down.

 

  1. Suppose there is a game with two players, Player 1 and Player 2. Each player has two strategies, Player 1 can play either "Up" or "Down," while Player 2 can play "Left" or "Right." The payoffs (π) for each player under the four possible outcomes of the game are as follows:

    P1 plays Up (π=4) & P2 plays Left (π=20),
    P1 plays Up (π=1) & P2 plays Right (π=16),
    P1 plays Down (π=8) & P2 plays Left (π=10),
    P1 plays Down (π=2) & P2 plays Right (π=12).

    What is the Nash equilibrium of the game if the players move sequentially with Player 1 moving first?
   

BBRRRAAAAAIINNSS

   

Down, Right

   

Left, Right

   

Up, Left

  1. A Herfindahl-Hirschman Index is calculated by
   

summing the squares of the market shares of each firm in the industry.

   

dividing the number of firms wanting to merge by the total number in the industry.

   

summing the amount of sales by the four largest firms and dividing by total industry sales.

   

summing the advertising expenditures of the firms that want to merge by total industry advertising expenditures.

 

  1. A profit maximizing monopoly's price is
   

less than the price that would prevail if the industry was perfectly competitive.

   

greater than the price that would prevail if the industry was perfectly competitive.

   

not consistently related to price that would prevail if the market was perfectly competitive.

   

the same as the price that would prevail if the industry was perfectly competitive.

 

  1. A monopolistically competitive firm will
   

always produce at the minimum efficient scale of production.

   

charge the same price as its competitors do.

   

have some control over its price because its product is differentiated.

   

produce an output level that is productively and allocatively efficient.

 

  1. When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the
   

substitution effect.

   

income effect.

   

output effect.

   

price effect.

 

  1. The key characteristics of a monopolistically competitive market structure include
   

sellers acting to maximize revenue.

   

high barriers to entry.

   

sellers selling similar but differentiated products.

   

few sellers.

 

 

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