ECON_002_QUIZ___3_SU07_1_ - ECON 002 QUIZ # 3 SU07 Student:...

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ECON 002 QUIZ # 3 SU07 Student: ___________________________________________________________________________ 1. Game theory provides tools that are used to model A. how perfectly competitive firms behave. B. cost functions faced by firms. C. consumer demand. D. interdependence. E. the behavior of a pure monopolist. 2. The three elements of a game are A. the firm, the consumers and the profit B. the players, the strategies and the payoffs C. the model, the graph and the costs D. the costs, the revenue and the profit E. the industry, the firms and the demand 3. Which of the following circumstances does not involve game theory? A. A local gas station owner wondering how his competition across the street will react to his decision to lower prices. B. Negotiating a salary when two firms have made offers. C. Deciding whether to continue a family feud. D. Firm behavior in a perfectly competitive market. E. Playing poker. 4. A payoff matrix is used to show A. the payoff to being a monopolist relative to a competitive firm. B. the demand curve faced by two competing firms C. each player's payoffs in each possible combination of strategies. D. the sequence of strategies played in a game over time. E. the different pairings of players in a game. 1
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5. A dominant strategy occurs when A. one player has a strategy that yields the highest payoff independent of the other player's choice. B. both players have a strategy that yields the highest payoff independent of the other's choice. C. both players make the same choice. D. the payoff to a strategy depends on the choice made by the other player. E. each player has a single strategy. 6. An agreement among firms to restrict production with the goal of earning economic profits is a A. pure monopoly. B. oligopoly. C. cartel. D. duopoly. E. legally enforceable contract in the United States. 7. The basic source of instability in all cartel agreements stems from A. the incentive to cheat by the members. B. legal judgment outlawing the cartel. C. mergers by the members. D. members expanding into new industries. E. inelastic demand for the member's output. 8. A credible threat is an action that is A. possible to carry out. B. legally enforceable. C. in the threatener's self interest to carry out. D. made by someone with a tough reputation E. not in the threatener's self interest to carry out. 2
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9. Laws that regulate the behavior of firms and of individuals are often enacted in order to A. eliminate all negative externalities. B. convert private benefits into positive externalities. C. provide longer prison terms for those that generate negative externalities. D. correct resource misallocation due to externalities. E. redistribute income more equitably. 10. An external benefit implies that private markets will provide ____ and an external cost implies that private
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This note was uploaded on 03/30/2008 for the course ECON 002 taught by Professor Mcleod,markpehlivan,ayseozg during the Summer '08 term at Pennsylvania State University, University Park.

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ECON_002_QUIZ___3_SU07_1_ - ECON 002 QUIZ # 3 SU07 Student:...

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