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Section A: Multiple Choice
Answer ALL questions. Each question is worth 1 mark.
Record your answers in the answer booklet.
1. In the sequential version of a game using the same players, the same strategies, and
the same possible outcomes as the original game, the equilibrium
may be different than in the original game.
must be different than in the original game.
will be the same as in the original game.
is the same as the cooperative version of the original game.
Consider the game shown in Scenario 1, below: Payoffs are in millions of dollars.
Lawrence LLP’ss payoff is listed before the comma
Buy Turbo Tech
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6. In the Scenario 2 game, what is the Nash equilibrium?
The strategy pair associated with $1, $10.
The strategy pair associated with $4, $0.
The strategy pair associated with $1, -$5000.
The strategy pair associated with $4, $4.
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7. Refer to Scenario 3. Gooi Cones’ payoff is listed before the comma, Ici Cones’ payoff
after the comma. If Ici Cones moves first, what outcome will occur?
Buy Gelato machines
Buy Yoghurt machines
Ici Cones will buy Gelato machines, and Gooi Cones will respond by
buying Yoghurt machines.
Ici Cones will buy Yoghurt machines, and Gooi Cones will respond
by buying Gelato machines.
Ici Cones will buy Yoghurt machines, and Gooi Cones will also buy
Yoghurt machines to retaliate.
Ici Cones will buy Gelato machines, and Gooi Cones will also buy
Gelato machines to retaliate.
Consider the game shown in Scenario 4, below:
8. Playing the game in Scenario 4 sequentially would
not change the equilibrium.
change the equilibrium to (C1,R1).
change the equilibrium to (C2,R1) if C moved first.
change the equilibrium to (C2,R1) if R moved first.
9. Playing the Scenario 4 game by using a maximin strategy would
not change the equilibrium from the equilibrium of the original game.
change the equilibrium to (R1,C2).
change the equilibrium to (R2,C1) if R moved first.
change the equilibrium to (R2,C1) if C moved first.
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10. To deter a potential entrant, an existing firm in a market may threaten to sharply
increase production so that the entrant will be left with a small share of the market.
The firm can make this threat credible by limiting its own options, and possible
actions of this type include:
signing long-term sales contracts that commit the firm to high levels
building a very large factory that could potentially produce enough
output to meet most of the market demand.
signing long-term purchase contracts for large amounts of
all of the above.
11. A firm can hire workers at a wage of $7 per hour. Assume that each worker works
7.5 hours a day. The firm’s production function is shown in Scenario 5, below. If
each unit of output sells for $4.30, how many days of labour will the firm hire to
Number of days of
Number of units of
12. When compared to the demand curve for a factor input when several inputs are
variable, the demand curve for a factor input when only one input is variable is
13. Assume that as...