Principles Of Economics 5th Edition By Frank – Test Bank

Principles Of Economics 5th Edition By Frank – Test Bank

9

Student: ___________________________________________________________________________

Game theory provides tools that are used to model:
how perfectly competitive firms behave.
cost functions faced by firms.

consumer demand.

interdependence.

The three elements of a game are:
the firm, the consumers, and the profit.

the players, the strategies, and the payoffs.

the model, the graph, and the costs.

the costs, the revenue, and the profit.

Game theory is not useful in understanding perfect competition because:

by assumption, the firms are so small as to be unable to influence price and thus are not interdependent.
perfectly competitive firms are honest.

the players can’t be identified.

the payoffs to their choices are unknown.

A payoff matrix is used to show:
the payoff to being a monopolist relative to a competitive firm.

the demand curve faced by two competing firms.

each player’s payoffs in each possible combination of strategies.

the sequence of strategies played in a game over time.

A dominant strategy occurs when:

one player has a strategy that yields the highest payoff regardless of the other player’s choice.

both players have a strategy that yields the highest payoff independent of the other’s choice.
both players make the same choice.

the payoff is the maximum possible combination of payoffs in the game.

6.Refer to the figure above. In this game, how many dominant strategies does Player A have?
0

1

2

4

7.Refer to the figure above. In this game, how many dominant strategies does Player B have?
0

1

2

4

8.Refer to the figure above. In this game, the dominated strategy for Player A:
is to play up.

is to cooperate with Player B.

is to play down.
will depend on Player B’s move.

9.Refer to the figure above. How many Nash equilibria are there?
0

1

2

3

10.Refer to the figure above. Player B can infer that Player A will:
always choose the Down strategy.

always choose the Up strategy.
choose Down when B chooses Left and choose Up when B chooses Right.

choose Up when B chooses Left and Down when B chooses Right.