G202 Exam 2 questions and answers 2026\2027 A+
Grade
Market Power
- correct answer When firms are able to restrict competition to sustain prices above marginal cost
What percent market power does a monopoly have?
- correct answer 100%
Market Strategies (4)
- correct answer 1. Guarding Trade Secrets
2. Control of an essential resourse
3. Exclusive contracts and customers lock in
4. Collusion (Form a cartel and act as a monopoly)
Non-Market Strategies (4)
- correct answer 1. Patent or copyright protection
2. Trade regulations
3. Government Licensing
4. Government or NGO certification
Optimal Sales Target
- correct answer Profit maximizing sales target occurs where MR=MC
If MR>MC...
- correct answer the firm could make a profit by selling one more unit
,If MC>MR...
- correct answer the firm would lose money one selling the unit
Optimal Price
- correct answer Given optimal sales target, price is found as a markup over cost, where the markup
factor depends on the demand of the product
A firm with market power sets price ___________ and output ___________ than efficient levels
- correct answer Higher, Lower
Perfect Price Discrimination
- correct answer Each consumer is charged a price equal to her willingness to pay
During Perfect Price Discrimination (2)
- correct answer -No social inefficiency occurs, but all market surplus goes to producer (CS=0)
-Profits increased relative to using a single price
Imperfect Price Discrimination
- correct answer Groups of consumers are charged different prices
During Imperfect Price Discrimination
- correct answer -Profits increased relative to single price, not as high as perfect price disc.
-Consumer surplus decreased, but not equal to zero
Three Parts of Game Theory
- correct answer 1. Players
2. Strategies
3. Payoffs
Game Theory~Players (2)
- correct answer 1. Decision makers within the game
2. Usually within firms, govt., or int. groups
, Game Theory~Strategies
- correct answer 1. Decision Choices
2. Price, Products, Advertising, Campaigning, Lobbying, Regulation
Game Theory~Payoffs
- correct answer 1. Outcomes of the Decision Choices
2. In terms of profits or losses
Dominant Strategy
- correct answer A strategy that results in the highest payoff for a player regardless of what strategy
their rival plays.
Secure Strategy
- correct answer In absence of a dominant strategy, play the strategy that guarantees the highest payoff
given the worst payoff.
Think Like your Rivals
- correct answer In absence of a dominant strategy, look at the game from your rivals perspective.
Nash Equilibrium
- correct answer No player can improve her payoff by unilaterally changing her strategy, given her rivals
strategy.
Normal Form Game
- correct answer A representation of a game that reveals the players, their possible strategies, and the
resulting payoffs
Extensive-form Game
- correct answer A representation of a game that summarizes the players, the available information, the
available strategies, the resulting payoffs, and the sequence of moves.
Grade
Market Power
- correct answer When firms are able to restrict competition to sustain prices above marginal cost
What percent market power does a monopoly have?
- correct answer 100%
Market Strategies (4)
- correct answer 1. Guarding Trade Secrets
2. Control of an essential resourse
3. Exclusive contracts and customers lock in
4. Collusion (Form a cartel and act as a monopoly)
Non-Market Strategies (4)
- correct answer 1. Patent or copyright protection
2. Trade regulations
3. Government Licensing
4. Government or NGO certification
Optimal Sales Target
- correct answer Profit maximizing sales target occurs where MR=MC
If MR>MC...
- correct answer the firm could make a profit by selling one more unit
,If MC>MR...
- correct answer the firm would lose money one selling the unit
Optimal Price
- correct answer Given optimal sales target, price is found as a markup over cost, where the markup
factor depends on the demand of the product
A firm with market power sets price ___________ and output ___________ than efficient levels
- correct answer Higher, Lower
Perfect Price Discrimination
- correct answer Each consumer is charged a price equal to her willingness to pay
During Perfect Price Discrimination (2)
- correct answer -No social inefficiency occurs, but all market surplus goes to producer (CS=0)
-Profits increased relative to using a single price
Imperfect Price Discrimination
- correct answer Groups of consumers are charged different prices
During Imperfect Price Discrimination
- correct answer -Profits increased relative to single price, not as high as perfect price disc.
-Consumer surplus decreased, but not equal to zero
Three Parts of Game Theory
- correct answer 1. Players
2. Strategies
3. Payoffs
Game Theory~Players (2)
- correct answer 1. Decision makers within the game
2. Usually within firms, govt., or int. groups
, Game Theory~Strategies
- correct answer 1. Decision Choices
2. Price, Products, Advertising, Campaigning, Lobbying, Regulation
Game Theory~Payoffs
- correct answer 1. Outcomes of the Decision Choices
2. In terms of profits or losses
Dominant Strategy
- correct answer A strategy that results in the highest payoff for a player regardless of what strategy
their rival plays.
Secure Strategy
- correct answer In absence of a dominant strategy, play the strategy that guarantees the highest payoff
given the worst payoff.
Think Like your Rivals
- correct answer In absence of a dominant strategy, look at the game from your rivals perspective.
Nash Equilibrium
- correct answer No player can improve her payoff by unilaterally changing her strategy, given her rivals
strategy.
Normal Form Game
- correct answer A representation of a game that reveals the players, their possible strategies, and the
resulting payoffs
Extensive-form Game
- correct answer A representation of a game that summarizes the players, the available information, the
available strategies, the resulting payoffs, and the sequence of moves.
