Test Mod 12 – Flashcards

What is a prisoner's dilemma? A. a game that involves no dominant strategies B. a game in which players act in rational, self-interested ways that leave everyone worse off C. a game in which players collude to outfox authorities D. a game in which prisoners are stumped because they cannot communicate with each other

What is the dominant strategy in the prisoner's dilemma? A. Do not confess because the other prisoner will most likely confess. B. There is no dominant strategy. C. Each prisoner confesses because this is the rational action to pursue. D. Do nothing in the hope that the other prisoner will also do nothing.

A situation in which each firm chooses the best strategy given the strategies chosen by other firms is called a A. payoff matrix. B. Nash equilibrium. C. dominant strategy. D. collusion.

A game in which each player adopts its dominant strategy A. could result in a Nash equilibrium. B. must be a cooperative game. C. will not lead to an equilibrium. D. can never result in a Nash equilibrium.

Sequential games are used to analyze A. situations in which one firm acts and other firms respond. B. cartels. C. firms that are subject to the prisoner's dilemma. D. second-price auctions.

A ________ is an extensive -form representation of a game. A. pure strategy B. payoff matrix C. Nash equilibrium D. game tree

Refer to the figure above. In equilibrium, ________. A. both firms will follow Strategy Y B. both firms will follow Strategy X C. Firm 1 will follow Strategy Y, and Firm 2 will follow Strategy X D. Firm 1 will follow Strategy X, and Firm 2 will follow Strategy Y https://tamu.blackboard.com/courses/1/ECON.202.599.1711/ppg/quiz11.31118161731/f1q7g1.jpg

Scenario: Phillip and Joseph are two classmates who represented their college in a quiz competition as a team and won $500. However, the winning amount was handed over by the organizers to their professor who had accompanied them. The professor gave the money to Phillip and asked him to offer any amount he wants to Joseph. If Joseph accepts the offer, the money would be split in the decided proportion between them. However, if Joseph rejects the offer, the money would go to their college fund. Refer to the scenario above. If Joseph prefers more money to less, ________. A. Phillip will offer the lowest possible amount to Joseph B. he will not accept any offer made by Phillip C. he will always accept any offer made to him D. he will accept the offer only if Phillip pays him an equal share of the money

Scenario: Phillip and Joseph are two classmates who represented their college in a quiz competition as a team and won $500. However, the winning amount was handed over by the organizers to their professor who had accompanied them. The professor gave the money to Phillip and asked him to offer any amount he wants to Joseph. If Joseph accepts the offer, the money would be split in the decided proportion between them. However, if Joseph rejects the offer, the money would go to their college fund. Refer to the scenario above. If Joseph prefers fairness to money, ________. A. he will not accept any offer made by Phillip B. he will accept the offer if offered an equal share of the money C. Phillip will offer the minimum amount of money to Joseph D. he will always accept any offer made to him

Prisoner's dilemma games imply that cooperative behavior between two people or two firms always breaks down. But reality teaches us that people and firms often cooperate successfully to achieve their goals. Why do the results from prisoner's dilemma games fail to predict real-world results? A. Prisoner's dilemma games do not permit people or firms from reneging on agreements, which often occurs in real-word situations. B. The prisoner's dilemma does not apply to most business situations that are repeated over and over. C. Prisoner's dilemma games predict the behavior of people and firms that engage in illegal activity; most people and firms do not resort to illegal activity. D. Most real-world situations involve more than two people or firms; the prisoner's dilemma is only applicable to situations that involve two parties.

Scenario: Tom and Harry are participating in a game in which the participants are divided into groups of two. Tom and Harry have been put in the same group. At each round of the game, Tom will be given an item. Tom can either give it to Harry or pass it on to the next team. If he decides to pass it on to the next team, neither of them will get the prize. If he gives it to Harry, Harry can either pass it on to the next team or sell it himself. If he passes it on to the next team, each of them will get $100. However, if he decides to sell it, he will get an amount higher than $100 and Tom will get nothing. Refer to the scenario above. Which of the following will happen in equilibrium if the game is played only once? A. Tom will trust Harry and Harry will cooperate. B. Tom will trust Harry and Harry will defect. C. Social surplus will be maximized. D. Neither of them will make any money

Economically rational means that consumers and firms A. are realistic about the present but not necessarily the future. B. take into account monetary costs but ignore nonmonetary opportunity costs. C. obtain full information prior to taking actions to reach goals. D. take actions that are appropriate to reach goals given available information. E. take into account monetary costs and sunk costs.

Which branch of economics considers that economic agents do not always act rationally? A. new wave economics. B. behavioral economics. C. social economics. D. irrational economics.

Anchoring is relating a value to some other known value A. except when the second value is irrelevant. B. that the customer has previously experienced. C. only when the second value is irrelevant. D. even if the second value is irrelevant.