Micro Economics Theory Applications I Set 2
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This set of MicroEconomics, Theory and Applications 1 Multiple Choice Questions & Answers (MCQs) focuses on Micro Economics Theory Applications I Set 2
Q1 | In Game Theory:
- firms are always assumed to act independently
- firms are always assumed to cooperate with each other
- firms always collude as part of a cartel
- firms consider the actions of others before deciding what to do
Q2 | In the Kinked Demand Curve theory:
- the marginal revenue curve is perfectly horizontal
- demand is always price inelastic
- demand is always price elastic
- non price competition is likely
Q3 | In oligopoly:
- the largest four firms are likely to have a small market share
- the price is likely to equal marginal revenue
- firms will continue to produce in the long run if price is less than average cost
- firms may collude or compete depending on their assumptions about their competitors
Q4 | A model of Game Theory of oligopoly is known as the:
- prisoner\s dilemma
- monopoly cell
- jailhouse sentence
- jury box
Q5 | In a cartel:
- firms compete against each other
- price wars are common
- firms use price to win market share from competitors
- firms collude
Q6 | In cartels
- each individual firm profit maximizes
- there may be an incentive to cheat
- the industry as a whole is loss making
- there is no need to police agreements
Q7 | A firm that considers the potential reactions of its competitors when it makes a decision
- is referred to as a price leader
- is engaged in strategic behaviour
- is engaged in collusion
- is referred to as a barometric firm
Q8 | Which of the following is an example of strategic behaviour?
- a firm builds excess capacity to discourage the entry of competitors
- a firm adopts the pricing behaviour of a dominant firm under the assumption that other firms will do likewise
- firms in an industry increase advertising expenditures to avoid losing market share
- all of the above are examples of strategic behaviour
Q9 | Which one of the following is a part of every game theory model?
- players
- payoffs
- probabilities
- strategies
Q10 | In game theory, a choice that is optimal for a firm no matter what its competitors do isreferred to as
- the dominant strategy
- the game-winning choice
- super optimal
- a gonzo selection
Q11 | Which of the following circumstances in an industry will result in a Nash equilibrium?
- all firms have a dominant strategy and each firm chooses its dominant strategy
- all firms have a dominant strategy, but only some choose to follow it
- all firms have a dominant strategy, and none choose it
- none of the above is correct
Q12 | A prisoners’ dilemma is a game with all of the following characteristics except one. Whichone is present in a prisoners’ dilemma?
- players cooperate in arriving at their strategies
- both players have a dominant strategy
- both players would be better off if neither chose their dominant strategy
- the payoff from a strategy depends on the choice made by the other player
Q13 | Which of the following legal restrictions, if enforced effectively, would be likely to solve aprisoners’ dilemma type of problem for the firms involved?
- a law that prevents a cartel from enforcing rules against cheating
- a law that makes it illegal for oligopolists to engage in collusion
- a law that prohibits firms in an industry from advertising their services
- all of the above would be likely to solve a prisoners\ dilemma for the firms
Q14 | Until recently, medical doctors and lawyers have been prohibited from engaging incompetitive advertising. If the prisoners’ dilemma applies to this situation, then the presence of this restriction would be likely to
- increase profits earned by individuals in these professions
- reduce profits earned by individuals in these professions
- have no effect on the profits earned by individuals in these professions
- increase the profits of some and reduce the profits of other individuals in these professions
Q15 | Which one of the following conditions is required for the success of a tit-for-tat strategy?
- demand and cost conditions must change frequently and unpredictably
- the number of oligopolists in the industry must be relatively small
- the game can be repeated only a small number of times
- firms must be unable to detect the behaviour of their competitors
Q16 | An oligopolist may engage in short-run behaviour that results in lower profits if
- it leads to a nash equilibrium
- it is a dominant strategy
- it is not involved in a repeated game
- it lends credibility to the firm\s threats
Q17 | A firm may decide to increase its scale so that it has excess production capacity because, by doing so, it is able to
- minimize its average cost of production
- establish a credible deterrent to the entry of competing firms
- take advantage of a dominant strategy in a prisoners’ dilemma
- attain a nash equilibrium and avoid repeated games
Q18 | Game theory is concerned with
- predicting the results of bets placed on games like roulette
- the choice of an optimal strategy in conflict situations
- utility maximization by firms in perfectly competitive markets
- the migration patterns of caribou in alaska
Q19 | Which of the following is an example of a game theory strategy?
- you scratch my back and i’ll scratch yours
- if the shoe fits, wear it
- monkey see, monkey do
- none of the above
Q20 | In game theory, a situation in which one firm can gain only what another firm loses is called a
- nonzero-sum game
- prisoners’ dilemma
- zero-sum game
- cartel temptation
Q21 | Which of the following is a nonzero-sum game?
- prisoners’ dilemma
- chess
- competition among duopolists when market share is the payoff
- all of the above
Q22 | Which of the following is a zero-sum game?
- prisoners’ dilemma
- chess
- a cartel member’s decision regarding whether or not to cheat
- all of the above
Q23 | A plan of action that considers the reactions of rivals is an example of
- accounting liability
- strategic behaviour
- accommodating behaviour
- risk management
Q24 | In game theory, the outcome or consequence of a strategy is referred to as the
- payoff
- penalty
- reward
- end-game strategy
Q25 | A strategy that is best regardless of what rival players do is called
- first-mover advantage
- a nash equilibrium strategy
- tit-for-tat
- a dominant strategy