ECON 200 Chapter Notes - Chapter 9: Decision Matrix, Nash Equilibrium, Backward Induction
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4. Game theory terminology
Select the term that best describes each definition listed in the following table.
Definition |
Nash Equilibrium |
Dominant Strategy |
Collusion |
Tit-for-tat Strategy |
Payoff Matrix |
Prisoners' Dilemma |
|
---|---|---|---|---|---|---|---|
A player's best choice, if it exists, regardless of his or her opponent's strategy | |||||||
A set of strategies (one for each player) in which each player's strategy is the best option for that player, given the chosen strategy of the player's opponents | |||||||
A case in which individually rational behavior leads to a jointly inefficient outcome | |||||||
A visual representation of a game showing all possible strategies for each player and all potential outcomes and payoffs |
1. Which of the following statements about oligopolies is not correct?
a. | Oligopolistic firms always charge the monopoly price. | |
b. | Oligopolistic firms are interdependent in a way that firms in perfect competition are not. | |
c. | An oligopolistic market has only a few sellers. | |
d. | The actions of any one seller can have a large impact on the profits of all other sellers. |
2. Which is true of an oligopoly market that reaches a Nash equilibrium?
a. | The firms will not have behaved as profit maximizers. | |
b. | A firm will have chosen its best strategy, given the strategies chosen by other firms in the market. | |
c. | A firm will not take into account the strategies of competing firms. | |
d. | The market price will be different for each firm. |
3. In game theory, what is a dominant strategy?
a. | the best strategy for a player to follow, regardless of the what strategies other players use | |
b. | a strategy that makes every player better off | |
c. | a strategy that must appear in every game | |
d. | the best strategy for a player to follow only if other players are cooperative |
4. Which of the following situations produces the largest profits for oligopolists?
a. | The firms reach a Nash equilibrium. | |
b. | The firms combine to produce the monopoly output level. | |
c. | The firms set prices equal to marginal cost. | |
d. | The firms produce a quantity of output that lies between the competitive outcome and the monopoly outcome. |
1. Which of the following statements about oligopolies is not correct?
a. | Oligopolistic firms always charge the monopoly price. | |
b. | Oligopolistic firms are interdependent in a way that firms in perfect competition are not. | |
c. | An oligopolistic market has only a few sellers. | |
d. | The actions of any one seller can have a large impact on the profits of all other sellers. |
2. Which is true of an oligopoly market that reaches a Nash equilibrium?
a. | The firms will not have behaved as profit maximizers. | |
b. | A firm will have chosen its best strategy, given the strategies chosen by other firms in the market. | |
c. | A firm will not take into account the strategies of competing firms. | |
d. | The market price will be different for each firm. |
3. In game theory, what is a dominant strategy?
a. | the best strategy for a player to follow, regardless of the what strategies other players use | |
b. | a strategy that makes every player better off | |
c. | a strategy that must appear in every game | |
d. | the best strategy for a player to follow only if other players are cooperative |
4. Which of the following situations produces the largest profits for oligopolists?
a. | The firms reach a Nash equilibrium. | |
b. | The firms combine to produce the monopoly output level. | |
c. | The firms set prices equal to marginal cost. | |
d. | The firms produce a quantity of output that lies between the competitive outcome and the monopoly outcome. |