Multiple choice problems on game theory.

1) Which of the following strategies are used by businesses to capture consumer surplus?

a) Price discrimination

b) Bundling

c) Two-part tariffs

d) All of the above

2) Nash equilibria are stable because

a) They involve dominant strategies

b) They involve zero-sum games

c) They occur in non-cooperative games

d) Once the strategies are chosen, no players have an incentive to negotiate jointly to change them.

e) Once the strategies are chosen, no player has an incentive to deviate unilaterally from them.

3) Bubba Burgers has discovered there are economies of scope available to the restaurant. Elucidate which is most likely to be a response to this discovery?

a) Bubba adds more varied inputs to burger production

b) Bubba expands burger production, focusing on that one good

c) Bubba contracts burger production

d) Bubba adds grilled chicken sandwiches to the menu

e) Bubba cuts back on the diversity of the menu

4) Carolyn knows average total cost and average variable cost for a given level of output. Which of the following costs can she not determine given this information?

a) Total cost

b) Average fixed cost

c) Variable cost

d) Fixed cost

e) She can determine all of the above costs given the information provided.

5) Karen is an executive at Dell Computer Company, in charge of designing the next version of laptop computers. She will consider such features as screen size, weight, processor speed, and CD and DVD drives. Given the fact that it is costly to include more features in new products, why might Karen be interested in data on how much consumers paid for a range of laptops with different attributes?

a) In order to estimate willingness to pay for each feature

b) In order to set an optimal price for the laptops

c) In order to determine the best features to include

d) In order to estimate the willingness to trade off one feature for another

Use the following information to answer problems 6-7:

Vita Bars

Sponsor marathon Sponsor TV running show

Sponsor

NRG Marathon 5, 9 9, 6

Bars Sponsor TV

Running Show 8, 14 3, 16

Note: Payoffs are in profits (Millions of dollars)

6) Which of the following is TRUE for this game?

a) NRG's dominant strategy is to sponsor the marathon

b) NRG's dominant strategy is to sponsor the TV show

c) Vita's dominant strategy is to sponsor the marathon

d) Vita's dominant strategy is to sponsor the TV show

e) Neither company has a dominant strategy

7) In this game, equilibrium

a) Is for both companies to sponsor the marathon

b) Is for both companies to sponsor the TV show

c) Is for NRG to sponsor the marathon and Vita to sponsor the TV show

d) Is for NRG to sponsor the TV show and Vita to sponsor the marathon

e) Does not exist for a simultaneous move game

8) Which of the following is NOT conducive to the successful operation of a cartel?

a) Market demand for the good is relatively inelastic

b) The cartel supplies all of the world's output of the good

c) Cartel members have substantial cost advantages over non-member producers

d) The supply of non-cartel members is very price elastic

9) In the long run, which of the following is considered a variable cost?

a) Expenditures for wages

b) Expenditures for research and development

c) Expenditures for raw materials

d) Expenditures for capital machinery and equipment

e) All of the above

10) A local restaurant offers "early bird" price discounts for dinners ordered from 4:30-6:30pm. This is an ex of:

a) Peak-load pricing

b) Second-degree price discrimination

c) A two-part tariff

d) Bundling

e) None of the above

11) The total cost of producing computer software diskettes (Q) is given as TC = 200 + 5Q. What is the variable cost?

a) 200

b) 5

c) 5Q

d) 5 + 200/Q

e) None of the above

12) How many economists does it take to change a light bulb?

a) Four, plus or minus 10.

b) Irrelevant. The light bulb's preferences are taken as given.

c) None. If the government would just leave it alone, it would screw itself in.

d) None. If it really needed changing, it would have already happened.

None, because look! It's getting brighter! It's definitely getting brighter!!!