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##### Consider the following information for a simultaneous move game

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1. Consider the following information for a simultaneous move game. If you;advertise and your rival advertises, you each earn $5 million in profits. If neither;of you advertise, you will each earn $10 million in profits. However, if one of;you advertises and the other does not, the firm that advertises will earn $15;million and non-advertising firm will earn $1 million. If you and your rival plan;to be in business for 10 years, then the Nash equilibrium is;A.;B.;C.;D.;For each firm to advertise each year.;For neither firm to advertise every year;For each firm to not advertise in any year.;For each firm to advertise in early years, but not advertise in later years.;2. If this one-shot game is repeated 3 times, the Nash equilibrium payoffs for Firm A;and B will be ______________ each period. (low, low (10,9), low high (15,8);high, low (-10,7), high, high (11,11).;A. (10,9);B. (11,11);C. (-10,7);D. (15,8);3. Which of the following conditions are necessary for the existence of a Nash;equilibrium?;A. The existence of dominant strategies for both players.;B. The existence of a dominant strategy for 1 player and the existence of a;secure strategy for another players.;C. The existence of secure strategies for both players.;D. None of the above.;4. Management and a labor union are bargaining over how much of a $50 surplus to;give to the union. The $50 is divisible up to one cent. The players have one-shot;to reach an agreement. Management has the ability to announce what it wants;first, and then the labor union can accept or reject the offer. Both players get zero;if the total amounts asked for exceed $50. Which of the following is true?;A.There are multiple Nash equilibria. B. $25/$25 is a Nash equilibria.;C. A Nash equilibrium is also a perfect equilibrium. D. A and B;Page 2;BUSN 6120 (T3);5. Normal form game low,low (0,0), low, high (50,-10), high, low (-10,50), high;high ((20,20);Suppose the game is infinitely repeated, and the interest rate is 10%. Both firms;agree to charge a high price, provided no player has charged a low price in the past.;If both firms stick to this agreement, then the present value of firm As payoff are;A. 220;B. 110;C. 330;D. 550;6. If you advertise and your rival advertises, you each earn $4 million in profits. If;neither of you advertise, you will each earn $10 million in profits. However, if;one of you advertises and the other does not, the firm that advertises will earn $1;million and non-advertising firm will earn $5 million. Which of the following is;true?;A.;B.;C.;D.;A dominant strategy for Firm A is to advertise.;A dominant strategy for Firm B is to advertise.;A Nash equilibrium is for both firms to advertise.;None of the above is true.;7. Consider the following innovation game. Firm A must decide whether or not to;introduce a new product. Firm B must decide whether or not to clone firm As;product. If firm A introduces and B clones, Firm A earns $1 and B earns $10. If;A introduces and B does not clone, then A earns $10 and B earns $2. If firm A;does not introduce, both firms earn profits of 0. Which of the following is true?;A.;B.;C.;D.;The subgame perfect Nash equilibrium profits are ($10, $2);It is not in As interest to introduce.;Firm A does not care if B clones.;None of the above are true.;8. Consider the following innovation game. Firm A must decide whether or not to;introduce a new product. Firm B must decide whether or not to clone firm As;product. If firm A introduces and B clones, then firm A earns $1 and B earns $10.;If A introduces and B does not clone, then A earns $10 and B earns $2. If firm A;does not introduce, both firms earn profits of 0. How many Nash equilibria are;there for this game?;A. 0;B. 1;Page 3;BUSN 6120 (T3);C. 2;D. 0, but there are secure strategies;9. You are the manager of a gas station and your goal is to maximize profits. Based;on your past experience, the elasticity of demand by Missourians for a car wash is;4, while the elasticity of demand by non-Missourians is 6. If you charge;Missourians $20 for a car wash, how much should you charge a person with an;Ohio license plate for a car wash?;A. $1.50;B. $15.00;C. $18.00;D. $20.00;10. Suppose P=20-2Q is the market demand for a local monopoly. The marginal cost;is 2Q. The firm currently uses a standard pricing strategy. Which of the;following will allow the firm to enhance the profits?;A. Engage in two-tier pricing. B. Engage in bundling. C. Engage in;randomized pricing.;D. Both A and B.;11. Which of the following statements is true?;A.;B.;C.;D.;The more elastic the demand, the higher is the profit-maximizing markup.;The more elastic the demand, the lower is the profit-maximizing markup.;The higher the marginal cost, the lower the profit-maximizing price.;The higher the average cost, the lower the profit-maximizing price.;12. Which of the following strategies will most likely NOT enhance profits in a;Bertrand oligopoly?;A. Two-tier pricing B. Price matching C. Randomized pricing D. Brand;loyalty;13. If a monopolist claims his profit-maximizing markup factor is 3, what is the;corresponding price elasticity of demand?;A. 1.5;B. 2;C. 2.5;D. 3;14. Which of the following pricing policies enhances profits by creating brand-loyal;consumers?;A. Frequent flyer programs B. Beat-or-pay strategies C. Trigger strategies;D. A and B.;15. If the profit-maximizing markup factor in a 10-firm Cournot oligopoly is 2, what;is the corresponding market elasticity of demand?;A. 1;B. 1.2;Page 4;BUSN 6120 (T3);C. 2;D. None of the above;16. First degree price discrimination;A. Occurs when a firm charges each consumer the maximum price he or she;would be willing to pay for each unit of the good purchased.;B. Results in the firm extracting all surplus from consumers;C. Both A and B;D. None of the above;17. Suppose a risk-neutral competitive firm must produce output before the market;price is known. If the uncertain price is given by P=P* + e, where e is a random;term with an expected value of 0, a competitive firm should shut down in the;short-run if;A. P*

Paper#29808 | Written in 18-Jul-2015

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