Econ200 Review Questions

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Fall, 2012
Prof. Peter Coughlin
TA: Yiqun Chen

Econ200: Review Questions
Note: this set of questions is used for the final review session. It is NOT an exhaustive representation of the topics covered in the final exam. For a complete list of topics covered in the exam, please refer to the course website.

1.

Once a cartel is formed, the market is in effect served by
a. a monopoly.
b. an oligopoly.
c. imperfect competition.
d. monopolistic competition.

2.

A situation in which firms choose their best strategy given the strategies chosen by the other firms in the market is called
a. a competitive equilibrium.
b. an open-market solution.
c. a socially-optimal solution.
d. a Nash equilibrium.

Table 17-11
Two home-improvement stores (Big Box Deluxe and Homes R Us) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Increases in annual profits of the two home-improvement stores are shown in the table below.

Homes
R Us

Increase the size
of store and
parking lot
Do not increase
the size of store
and parking lot

Big Box Deluxe
Increase the size of store
Do not increase the size of
and parking lot
store and parking lot
Big Box Deluxe = $0.20
Big Box Deluxe = $0.50
million
million
Homes R Us = $1.70 million
Homes R Us = $0.75 million
Big Box Deluxe = $1.60
Big Box Deluxe = $1.00
million
million
Homes R Us = $0.30 million
Homes R Us = $1.25 million

3.

Refer to Table 17-11. Increasing the size of its store and parking lot is a dominant strategy for a. Big Box Deluxe, but not for Homes R Us.
b. Homes R Us, but not for Big Box Deluxe.
c. both stores.
d. neither store.

4.

Refer to Table 17-11. When this game reaches a Nash equilibrium, annual profit will grow by a. $0.75 million for Homes R Us and by $0.50 million for Big Box Deluxe. b. $1.70 million for Homes R Us and by $0.20 million for Big Box Deluxe. c. $0.30 million for Homes R Us and by $1.60 million for Big Box Deluxe. d. $1.25 million for Homes R Us and by $1.00 million for Big Box Deluxe.

5.

Refer to Table 17-11. Suppose the owners of Big Box Deluxe and Homes R Us meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit. They should both agree to a. increase their store and parking lot sizes.

b. refrain from increasing their store and parking lot sizes. c. be more competitive in capturing market share.
d. share the context of their conversation with the Federal Trade Commission.

Table 17-12. This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B).
B
A

Up
Down

Right
(2, 2)
(1, 3)

Left
(3, 1)
(0, 0)

6.

Refer to Table 17-12. Which of the following statements about this game is true? a. Up is a dominant strategy for A and Right is a dominant strategy for B. b. Up is a dominant strategy for A and Left is a dominant strategy for B. c. Down is a dominant strategy for A and Right is a dominant strategy for B. d. Down is a dominant strategy for A and Left is a dominant strategy for B.

7.

Refer to Table 17-12. Which outcome is the Nash equilibrium in this game? a. Up-Right
b. Up-Left
c. Down-Right
d. Down-Left

8.

The Condorcet paradox
a. proved that the Arrow impossibility theorem is wrong.
b. was proved wrong by the Arrow impossibility theorem.
c. serves as an example of the Arrow impossibility theorem.
d. pertains to voting systems, whereas Arrow's Impossibility Theorem does not.

9.

When each voter has a most-preferred outcome for the expenditure on a particular government program, majority rule will produce the outcome
a. preferred by the mean (average) voter.
b. preferred by the median voter.
c. that causes...
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