ESFM2-L10 Score:
1.    Choose which of the following statements is correct:
A Dominant strategies lead always to a Pareto-inefficient situation.
B There is a dominant strategy in each game.
C The dominant strategy is a strategy, that is optimal for each player regardless of choices of other
players.
2.    Choose a statement that IS NOT correct.
A A mixed strategy is a probability distribution over actions of a player.
B A reaction function shows the optimal action of one player for all combinations of actions of other
players.
C The equilibrium concept in a sequential game is called the equilibrium in dominant strategies.
D The Nash equilibrium is a situation in which a choice of all players is optimal given choices of all
other players.
3.    Let's have a Cournot oligopoly with a decreasing market demand and a
homogeneous product. All firms have the same, constant marginal costs and zero
fixed costs. If the number of firms goes up, the market price goes down and market
quantity increases.
A True
B False
4.    Two firms choose quantity. If the equilibrium point, depicted in a graph, is on
the reaction function of firm 1, but not the reaction function of firm 2, then this is
the outcome of
A Bertrand model.
B Cournot model.
C Stackelberg model, in which firm 1 is the leader.
D Stackelberg model, in which firm 2 is the leader.
5.    Let's assume that the firms in the Cournot and Stackelberg duopoly have zero
costs and face the same downward-sloping linear demand function. Then in
Stackelberg model,
A the price is lower than in Cournot model.
B both firms produce the same quantity.
C the total quantity is lower than in Cournot model.
D the leader has a lower profit than the follower.
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