Top 80+ Solved MicroEconomics, Theory and Applications 1 MCQ Questions Answer
Q. In cartels
a. each individual firm profit maximizes
b. there may be an incentive to cheat
c. the industry as a whole is loss making
d. there is no need to police agreements
Q. A firm that considers the potential reactions of its competitors when it makes a decision
a. is referred to as a price leader
b. is engaged in strategic behaviour
c. is engaged in collusion
d. is referred to as a barometric firm
Q. Which of the following is an example of strategic behaviour?
a. a firm builds excess capacity to discourage the entry of competitors
b. a firm adopts the pricing behaviour of a dominant firm under the assumption that other firms will do likewise
c. firms in an industry increase advertising expenditures to avoid losing market share
d. all of the above are examples of strategic behaviour
Q. Which one of the following is a part of every game theory model?
a. players
b. payoffs
c. probabilities
d. strategies
Q. In game theory, a choice that is optimal for a firm no matter what its competitors do isreferred to as
a. the dominant strategy
b. the game-winning choice
c. super optimal
d. a gonzo selection
Q. Which of the following circumstances in an industry will result in a Nash equilibrium?
a. all firms have a dominant strategy and each firm chooses its dominant strategy
b. all firms have a dominant strategy, but only some choose to follow it
c. all firms have a dominant strategy, and none choose it
d. none of the above is correct
Q. A prisoners’ dilemma is a game with all of the following characteristics except one. Whichone is present in a prisoners’ dilemma?
a. players cooperate in arriving at their strategies
b. both players have a dominant strategy
c. both players would be better off if neither chose their dominant strategy
d. the payoff from a strategy depends on the choice made by the other player
Q. Which of the following legal restrictions, if enforced effectively, would be likely to solve aprisoners’ dilemma type of problem for the firms involved?
a. a law that prevents a cartel from enforcing rules against cheating
b. a law that makes it illegal for oligopolists to engage in collusion
c. a law that prohibits firms in an industry from advertising their services
d. all of the above would be likely to solve a prisoners\ dilemma for the firms
Q. Until recently, medical doctors and lawyers have been prohibited from engaging incompetitive advertising. If the prisoners’ dilemma applies to this situation, then the presence of this restriction would be likely to
a. increase profits earned by individuals in these professions
b. reduce profits earned by individuals in these professions
c. have no effect on the profits earned by individuals in these professions
d. increase the profits of some and reduce the profits of other individuals in these professions
Q. Which one of the following conditions is required for the success of a tit-for-tat strategy?
a. demand and cost conditions must change frequently and unpredictably
b. the number of oligopolists in the industry must be relatively small
c. the game can be repeated only a small number of times
d. firms must be unable to detect the behaviour of their competitors
Q. An oligopolist may engage in short-run behaviour that results in lower profits if
a. it leads to a nash equilibrium
b. it is a dominant strategy
c. it is not involved in a repeated game
d. it lends credibility to the firm\s threats
Q. A firm may decide to increase its scale so that it has excess production capacity because, by doing so, it is able to
a. minimize its average cost of production
b. establish a credible deterrent to the entry of competing firms
c. take advantage of a dominant strategy in a prisoners’ dilemma
d. attain a nash equilibrium and avoid repeated games
Q. Game theory is concerned with
a. predicting the results of bets placed on games like roulette
b. the choice of an optimal strategy in conflict situations
c. utility maximization by firms in perfectly competitive markets
d. the migration patterns of caribou in alaska
Q. Which of the following is an example of a game theory strategy?
a. you scratch my back and i’ll scratch yours
b. if the shoe fits, wear it
c. monkey see, monkey do
d. none of the above
Q. In game theory, a situation in which one firm can gain only what another firm loses is called a
a. nonzero-sum game
b. prisoners’ dilemma
c. zero-sum game
d. cartel temptation