ECON 040 Lecture Notes - Lecture 23: Economic Equilibrium, Pareto Efficiency, Demand Curve
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QUESTION 1
Stackelberg duopoly game is also known as the ________ model. If we change the Stackelberg ______ competition game to a simultaneous-move game, we get the ______ game results.
A. | leader-follower, quantity; Cournot | |
B. | Competitive fringe; price; backward induction | |
C. | leader-follower, quantity; Bertrand | |
D. | entry, price; Cournot |
QUESTION 2
Comparing Stackelberg and Cournot competition results, we can say that the _____ is better off while the ______ is worse off under Stackelberg than under Cournot results. This result show that there is _______________ advantage.
A. | entrant, incumbent, investment | |
B. | leader, follower, first-mover | |
C. | follower, leader, a size | |
D. | incumbent, entrant, first-mover |
QUESTION 3
Mark all the FALSE statements
A. | An equilibrium is a collection of strategies (and a strategy is a complete plan of action), whereas an outcome describes what will happen only in the contingencies that are expected to arise, not in every contingency that might arise. | |
B. | In games of complete but imperfect information, backward induction is still the strongest process to solve the model to get unique equilibrium. | |
C. | All subgame perfect Nash equilibria (SPNE) are Nash equilibria (NE), but not all Nash equilibria is SPNE | |
D. | We cannot apply the notion of Nash equilibrium to dynamic games of complete information if we allowed a player s strategy to leave unspecified actions in some contingencies. | |
E. | A game can be of perfect information whenever Nature or Luck does not play, each information set does not necessarily need to have a single node. |
QUESTION 4
True or false. Mark the correct sequence:
I. Simultaneity of moves means that these games have imperfect information.
II. Dynamic games of complete and perfect information do not necessarily need that a player observes all the previous moves, just part of them are fine.
III. Backward induction and subgame perfect equilibrium concept lead to the same result in games of incomplete information.
IV. Any game in extensive form is a subgame itself.
A. | TFFT | |
B. | TTTF | |
C. | FTFF | |
D. | TTFT |
QUESTION 5
The subgame perfect Nash equilibrium is the equilibrium associated with ____________ outcome. Subgame perfect equilibrium ________ non-credible threats.
A. | Maxmin; involves | |
B. | the backward induction; does not involve | |
C. | Iterative deletion of weakly dominated strategies; rules out | |
D. | the backward induction; includes |
1
The following table shows the market demand schedule and supply schedule for notebooks.
Price ($/unit) |
Quantity Demanded (units) |
Quantity Supplied (units) |
1 |
20 |
4 |
2 |
16 |
6 |
3 |
14 |
10 |
4 |
12 |
12 |
5 |
10 |
14 |
6 |
7 |
17 |
7 |
4 |
20 |
8 |
2 |
22 |
9 |
1 |
25 |
Refer to the table above. Assume that the market for notebooks is in equilibrium.
1. Which of the following is likely to happen if there is an increase in the school enrollment rate, everything else remaining unchanged?
A. Both the equilibrium price and quantity of notebooks decrease.
B. The equilibrium price and quantity remain unchanged.
C. Both the equilibrium price and quantity of notebooks increase.
D. The equilibrium price increases, but the equilibrium quantity of notebooks decreases.
2. A shortage occurs in a market when:
A.price is lower than the equilibrium price.
B. price is higher than the equilibrium price.
C. supply exceeds demand.
D. the marginal utility of consumption is negligible.
3. A change in the quantity demanded of a good is:
A. the outcome of a change in income.
B. the outcome of a change in tastes and preferences.
C. represented by a shift to a new demand curve.
D. represented by a movement along the demand curve.
4. The following table shows the demand schedules of three consumers of wine. Assume that these three buyers constitute the entire market.
PRICE ($/Bottle) |
Sandra's Demand (Bottles) |
David's Demand (Bottles) |
Mary's Demand (Bottles) |
â$8 |
2 |
10 |
|
â$6 |
14 |
15 |
18 |
â$4 |
23 |
24 |
|
â$2 |
24 |
27 |
28 |
Refer to the table above. If the market price of wine is $8/bottle, and the market demand for wine is 19 bottles, David's consumption of wine is:
A. 12 bottles.
B. 9 bottles.
C. 4 bottles.
D. 7 bottles.
5. Which of the following factors will NOT cause a shift in the demand for a good?
A. A change in the number of consumers
B. A change in the market price of the good
C. A change in tastes and preferences
D. A change in consumer incomes
6. Are all markets perfectly competitive?
A. No, there are other market types where firms have considerable power to control the price.
B. Yes, any economic system with a market structure is by definition perfectly competitive.
C. No, there are also command and control markets that are run by a central government.
D. No, in other types of markets, sellers offer identical goods and simply accept the market price.
7. Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will:
A. increase his profit.
B. lose only a few buyers.
C. increase his sales.
D. lose almost all of his buyers.
8. The willingness to pay for a commodity:
A. increases as the consumption of the commodity increases.
B. is always less than the market price of the commodity.
C. decreases as the consumption of the commodity increases.
D. is always greater than the market price of the commodity.
9. Which of the following is likely to lead to a right shift in the supply curve of cotton?
A. An increase in labor productivity due to training programs
B. A rise in labor costs due to wage demands by labor unions
C. An increase in the price of cotton
D. A decrease in the price of cotton
10. The buyers of a good will want to purchase it as long as their willingness to pay for the good is:
A. equal to zero.
B. greater than or equal to the price.
C. greater than zero.
D. less than the price.