In using a prisoners' dilemma game to model the behavior of firms within an oligopoly, we are assuming that:
a. each firm seeks to act in its best interest.
b. each firm seeks to act in the best interest of the industry as a whole.
c. all firms will pursue the same strategy.
d. each firm will pursue a different strategy.
Ans: a. each firm seeks to act in its best interest.
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Backward induction is a useful tool for:
A. finding an optimal strategy in a sequential game. B. analyzing the decisions in a prisoner's dilemma-type game. C. finding an optimal strategy in a simultaneous game. D. Backward induction is useful in any of these games.
Refer to Figure a. Charlie and Joe both want to ride shotgun with their mother, so they play a game of rock-paper-scissors to determine who gets to sit in the front seat. In the table, -1 represents a loss, 1 a win and 0 a tie, and Joe's payoff is shown in the upper left-hand corner of each cell, while Charlie's appears in the lower right-hand corner. What is the Nash equilibrium?
A. Charlie chooses rock, Joe chooses rock
B. Charlie chooses rock, Joe chooses paper
C. Charlie chooses paper, Joe chooses scissors
D. There is no Nash equilibrium.
Ellie and Brendan both produce apple pies and vanilla ice cream. If Ellie's opportunity cost of one apple pie is 1/2 gallon of ice cream and Brendan's opportunity cost of one apple pie is 1/4 gallon of ice cream, a mutually advantageous trade can be struck at a price of one apple pie for 1/3 gallon of ice cream
a. True b. False Indicate whether the statement is true or false
If the demand for a good decreases as income decreases, then the good is a(n):
A. complementary good. B. substitute good. C. inferior good. D. normal good.