1.
Suppose that two players are playing the following game. Player A can choose either Top or Bottom, and Player B can choose either Left or Right. The payoffs are given in the following table where the number on the left is the payoff to Player A, and the number on the right is the payoff to Player B.
Does Player A have a dominant strategy? If so, what is it?
A) Top is a dominant strategy for Player A
B) Bottom is a dominant strategy for Player A
C) Both of the above
D) None of the above
2.
Does Player B have a dominant strategy? If so, what is it?
A) Left is a dominant strategy for Player B
B) Right is a dominant strategy for Player B
C) Both of the above
D) None of the above
3.
For the next four questions, you'll be asked whether a strategy combination is a Nash equilibrium or not. Player A plays Top and Player B plays Left
A) This is a Nash equilibrium
B) This is NOT a Nash equilibrium
4.
Player A plays Bottom and Player B plays Left
A) This is a Nash equilibrium
B) This is NOT a Nash equilibrium
5.
Player A plays Top and Player B plays Right
A) This is a Nash equilibrium
B) This is NOT a Nash equilibrium
6.
Player A plays Bottom and Player B plays Right
A) This is a Nash equilibrium
B) This is NOT a Nash equilibrium
7.
If each player plays her maximin strategy, what will be the outcome of the game?
A) Player A plays Top and Player B plays Left
B) Player A plays Bottom and Player B plays Left
C) Player A plays Top and Player B plays Right
D) Player A plays Bottom and Player B plays Right
8.
Now suppose the same game is played with the exception that Player A moves first and Player B moves second. Using the backward induction method discussed in the online class notes, what will be the outcome of the game?
A) Player A plays Top and Player B plays Left
B) Player A plays Bottom and Player B plays Left
C) Player A plays Top and Player B plays Right
D) Player A plays Bottom and Player B plays Right
9.
For the next five questions, consider a monopolist. Suppose the monopolist faces the following demand curve: P = 100 - 3Q. Marginal cost of production is constant and equal to $10, and there are no fixed costs. What is the monopolist's profit maximizing level of output?
A) Q = 10
B) Q = 15
C) Q = 16
D) Q = 30
E) Q = 33
F) none of the above
10.
What price will the profit maximizing monopolist charge?
A) P = $100
B) P = $55
C) P = $45
D) P = $15
E) P = $10
F) none of the above
11.
How much profit will the monopolist make if she maximizes her profit?
A) Profit = $300
B) Profit = $327.5
C) Profit = $825
D) Profit = $1,012.5
E) Profit = $1,350
F) none of the above
12.
What is the value of consumer surplus?
A) CS = $300
B) CS = $100
C) CS = $412.5
D) CS = $337.5
E) CS = $750
F) none of the above
13.
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What is the value of the deadweight loss created by this monopoly?
A) Deadweight loss = $412.5
B) Deadweight loss = $250
C) Deadweight loss = $675
D) Deadweight loss = $750
E) Deadweight loss = $337.5
F) none of the above
14.
These next five problems consider tax incidence. Suppose the market supply and demand for guitars in Happy Valley are given by:
Demand: P = 300 - (1/2)Q
Supply: P = 100 + (1/3)Q
What is the equilibrium price and quantity of the product?
A) P* = 120, Q* = 1200
B) P* = 180, Q* = 240
C) P* = 60, Q* = 480
D) P* = 225, Q* = 150
E) none of the above
15.
What is the price elasticity of demand at the equilibrium price?
A) Elasticity = -1
B) Elasticity = -2
C) Elasticity = -0.5
D) Elasticity = -0.666
E) none of the above
16.
For the next three questions, assume there is $20 per unit tax levied on the consumers of guitars. What price will buyers pay after the tax is imposed?
A) $192
B) $200
C) $160
D) $190
E) none of the above
17.
What is the quantity of the good that will be sold after the tax is imposed?
A) 196
B) 210
C) 224
D) 216
E) none of the above
18.
What is the deadweight loss created by the tax?
A) DWL = $360
B) DWL = $120
C) DWL = $240
D) DWL = $480
E) none of the above
19.
For the next nine questions, refer to the table above. Nebraska and Virginia each have 100 acres of farmland. The table gives the hypothetical figures for yield per acre in the two states. Who has the absolute advantage in the production of wheat?
A) Nebraska
B) Virginia
C) Both of the above
D) None of the above
20.
Who has the absolute advantage in the production of cotton?
A) Nebraska
B) Virginia
C) Both of the above
D) None of the above
21.
Who has the comparative advantage in the production of wheat?
A) Nebraska
B) Virginia
C) Both of the above
D) None of the above
22.
Who has the comparative advantage in the production of cotton?
A) Nebraska
B) Virginia
C) Both of the above
D) None of the above
23.
For the next four problems, you will find actual points on the combined PPC of the two states. You will be given a value of one good, and you must calculate the maximum amount of the other good that the two states could produce working together.
200 Wheat:
A) 500 Cotton
B) 600 Cotton
C) 700 Cotton
D) 800 Cotton
E) None of the above
24.
240 Cotton:
A) 880 Wheat
B) 640 Wheat
C) 520 Wheat
D) 480 Wheat
E) None of the above
25.
680 Cotton:
A) 120 Wheat
B) 240 Wheat
C) 360 Wheat
D) 480 Wheat
E) None of the above
26.
560 Wheat:
A) 120 Cotton
B) 240 Cotton
C) 360 Cotton
D) 480 Cotton
E) None of the above
27.
In Virginia, what is the marginal rate of transformation between wheat and cotton? (Assume wheat is graphed on the vertical axis.)
A) -0.75
B) -1.333
C) -1.5
D) -2