In the 1980s, the USA and the USSR negotiated a reduction in nuclear arms; this is an example of a A) non-cooperative equilibrium. B) cooperative outcome that may not be a Nash equilibrium. C) cooperative outcome that was a Nash equilibrium. D) sub-game perfect equilibrium. ANSWER B
In a two-player simultaneous game where neither player has a dominant strategy, A) there is never a Nash equilibrium. B) there is only one Nash equilibrium. C) the actual outcome is unpredictable. D) the actual outcome will not be a Nash equilibrium. ANSWER C
A mixed strategy may A) be part of a Nash equilibrium. B) be a set of probabilities of selecting each possible action. C) lead identical firms to choose different actions. D) All of the above. ANSWER D
If a firm sells to two distinct identifiable markets and resale is impossible, why is price discrimination more profitable than setting a single price? What will be an ideal response? ANSWER If the firm charges a single price on the two different markets, marginal revenue in one market will exceed marginal revenue in the […]
Nonlinear price discrimination is A) perfect price discrimination. B) quantity price discrimination. C) group price discrimination. D) two-part pricing. ANSWER B
The more block prices a monopoly can set instead of setting a single price, A) the smaller the deadweight loss. B) the more producer surplus. C) the larger the total welfare. D) All of the above. ANSWER D
A mail-order clothing company offers a discount if customers purchase two shirts instead of only one. This is necessarily an example of quantity discrimination. Indicate whether the statement is true or false ANSWER False. The shipping cost per item is less for two shirts than for one. This cost difference may explain the discount. […]
What is one reason suppliers might offer a discount for quantity purchases? A) reduced storage costs B) lower marginal cost C) lower marginal benefit D) price gouging ANSWER A
After analyzing his opponent, a tennis player decides to serve 10% of his serves to the left, 50% of his serves to the right, and 40% of his serves at the body of his opponent. This illustrates a A) deterministic strategy. B) dominant strategy. C) mixed strategy. D) non-game theoretic problem. ANSWER C
If you purchase one pound of apples the price is $1.50 per pound. If you buy a five pound bag of apples, the cost is $5.00. This is most likely an example of A) quantity discounts. B) lower marginal cost. C) lower marginal benefit. D) price gouging. ANSWER A