EC2106F08PS16 - Name: _ Class: _ Date: _ ID: A Practice...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Name: ________________________ Class: ___________________ Date: __________ ID: A 1 Practice Problem for Ch 16 Multiple Choice Identify the choice that best completes the statement or answers the question. Scenario 16-3. Consider two countries, Muria and Zenya, that are engaged in an arms race. Each country must decide whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other because a large arsenal gives it more influence in world affairs. But each country also prefers to live in a world safe from the other country's weapons. The following table shows the possible outcomes for each decision combination. The numbers in each cell represent the country’s ranking of the outcome (4 = best outcome, 1 = worst outcome). Zenya Build new weapons Disarm existing weapons Muria Build new weapons Muria: 2 Zenya: 2 Muria: 4 Zenya: 1 Disarm existing weapons Muria: 1 Zenya: 4 Muria: 3 Zenya: 3 1. Refer to Scenario 16-3 . Which of these statements is correct? (i) Muria is better off building new weapons if Zenya builds new weapons. (ii) Muria is better off building new weapons if Zenya disarms existing weapons. (iii) Building new weapons is Muria's dominant strategy. a. (i) and (ii) b. (ii) and (iii) c. (i) and (iii) d. (i), (ii), and (iii) 2. OPEC is able to raise the price of its product by a. tying. b. setting production levels for each of its members. c. increasing the supply of oil above the competitive level. d. imposing resale price maintenance agreements on members. Scenario 16-4. Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market and earn $50 million each. If they both advertise, they again split the market, but profits are lower by $10 million since each company must bear the cost of advertising. Yet if one company advertises while the other does not, the one that advertises attracts customers from the other. In this case, the company that
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/08/2011 for the course ECON 2106 taught by Professor Minjaesong during the Fall '06 term at Georgia Institute of Technology.

Page1 / 5

EC2106F08PS16 - Name: _ Class: _ Date: _ ID: A Practice...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online