For questions 1-3, consider the following information for a simultaneous move game:

1			If the two firms only plan to be in business for one year, the Nash equilibrium is
			A)	for both firms to advertise.
			B)	for both firms not to advertise.
			C)	for firm A to advertise and firm B not to advertise.
			D)	for firm A not to advertise and firm B to advertise.
2			If the two firms plan to be in business for 20 years, then the Nash equilibrium is
			A)	for both firms to not advertise in any year.
			B)	for both firms to advertise in every year.
			C)	for neither firm to advertise in early years, but to advertise in later years.
			D)	for each firm to advertise in early years, but not advertise in later years.
3			If both firms plan to bequest their businesses to their children and that process continues forever, then a Nash equilibrium when the interest rate is zero is
			A)	for both firms to never advertise.
			B)	for firm A to always advertise when firm B does.
			C)	for both firms to not advertise until the rival does, and then to advertise forever.
			D)	for both firms to advertise until the rival does not advertise, and then not advertise forever.
4			A coordination problem usually occurs in situations where there is
			A)	no Nash equilibrium in a game.
			B)	a unique, but undesirable Nash equilibrium.
			C)	no dominant strategies for both players.
			D)	more than one Nash equilibrium.
5			A strategy that guarantees the highest payoff given the worst possible scenario is referred to as a
			A)	dominant strategy.
			B)	secure strategy.
			C)	mixed strategy.
			D)	trigger strategy.

Refer to the following normal form game of price competition for questions 6-8.

6			Suppose the game is infinitely repeated, and the interest rate is 15%. Both firms agree to charge a high price, provided no player has charged a low price in the past. If both firms stick to this agreement, then the present value of Firm B's payoffs are:
			A)	46.
			B)	14.
			C)	107.
			D)	7.
7			Suppose that Firm A deviates from a trigger strategy to support a high price. What is the present value of Firm A's payoff from cheating?
			A)	46.
			B)	14.
			C)	107.
			D)	7.
8			What is the maximum interest rate that can sustain collusion?
			A)	30%.
			B)	25%.
			C)	50%.
			D)	75%.
9			A mixed strategy is one that
			A)	guarantees the highest payoff given the worst possible scenario.
			B)	results in the highest payoff regardless of the opponent's action.
			C)	is contingent on the past play of a game in which a particular past action causes a different action by a player.
			D)	a player randomizes over several available actions to make her current action less predictable.
10			Game theory is best applied to analysis of
			A)	only pricing behavior of oligopoly firms.
			B)	only output choices of oligopoly firms.
			C)	both output and pricing behavior of oligopoly firms.
			D)	Game theory is seldom used to analyze oligopoly markets.
11			Which of the following is true?
			A)	A perfect equilibrium is always Nash.
			B)	A Nash equilibrium is always perfect.
			C)	A Nash equilibrium is always perfect in a multistage game.
			D)	Both A and C.
12			When analyzing the behavior of oligopoly firms, which of the following is crucial for the success of game theoretic analysis?
			A)	The order in which players make decisions is important, so the consideration of a one-shot or repeated game is not important.
			B)	Constructing the payoffs of the oligopolists to be interdependent is important as the payoff of one player usually affects the payoff of the other players.
			C)	Payoffs do not need to reflect the true payoffs of the oligopolists, they just need to be greater than or equal to zero.
			D)	Assume that oligopolists always move simultaneously.
13			Management and a labor union are bargaining over how much of a $100 surplus to give to the union. The $100 is divisible up to one cent. The players have one-shot to reach an agreement. Management has the ability to announce what it wants first, and then the labor union can accept or reject the offer. Both players get zero if the total amounts asked for exceed $100. Which of the following is true?
			A)	There are no Nash equilibria.
			B)	($100, $0) is a Nash equilibrium.
			C)	($50, $50) is not a Nash equilibrium.
			D)	Both A and C.
14			Which of the following is an incorrect statement regarding the industry structure and conduct variables that influence collusion in pricing games?
			A)	Collusion is easier when there are fewer firms in the industry.
			B)	Diseconomies of scale exist in the monitoring costs of firms, making it easier for smaller firms to monitor collusive agreements.
			C)	Firms learn from experience how other firms will behave in the market, so market history can affect the ability to support collusion.
			D)	The ability to practice price discrimination can effectively enhance the punishment mechanisms supporting collusive agreements.
15			Tacit collusion in an infinitely repeated game is easier to sustain when
			A)	there are many players involved.
			B)	the interest rate is higher.
			C)	the present value of cheating is higher.
			D)	None of the above.