Question

2a.) Firms hiring lobbyists to keep out new entrants and avoid competition is an example of:

A. rent seeking.

B. enforcing a free market.

C. regulatory restrictions.

D. economies of scale.

2b.) A trigger strategy is a strategy that:

A. depends on an opponent's past decisions.

B. is not relevant to oligopolies.

C. tells a business to leave the industry because the price is below the AVC.

D. determines when to enter an industry.

2c.) A trigger strategy is a strategy that:

A. depends on an opponent's past decisions.

B. is not relevant to oligopolies.

C. tells a business to leave the industry because the price is below the AVC.

D. determines when to enter an industry.

2d.) The best-response method assumes that each player will:

A. cooperate with all the other players to maximize their joint outcome.

B. choose his or her best payoff, ignoring the actions of all other players.

C. choose his or her best payoff, taking into account the actions of all other players.

D.always choose the action that is the cheapest to implement.

Answer 1

2a. When a firm indulges into actions so as to deter the entry of a new competitor into the industry through the help of lobbyists, who influence the decision of the legislators, it is known as rent seeking.

Rent seeking is done to influence policy decisions through lobbying, in order to maximise own profits.

Correct Answer : Option A. rent seeking

2b.  A trigger strategy is based on your opponent's past decisions. Trigger strategy is one where a player intends to maximise profits for both the firms who are colluding. Once the other player deviates from collusion, the first player then changes its strategy, in response to its opponents strategy, in the next periods. They both end up settling at the Nash Equilibrium strategy, earning lesser than the collusive profits.

Correct Answer : Option A. depends on an opponent's past decisions

2c. A trigger strategy is based on your opponent's past decisions. Trigger strategy is one where a player intends to maximise profits for both the firms who are colluding. Once the other player deviates from collusion, the first player then changes its strategy, in response to its opponents strategy, in the next periods. They both end up settling at the Nash Equilibrium strategy, earning lesser than the collusive profits.

Correct Answer : Option A. depends on an opponent's past decisions

2d. The best response for a player is one where it maximises its own pay-offs 'given' the strategies of its opponents (other players). It implies that the players takes into account the actions of its opponents while making a decision, so as to maximise its own profits.

Correct Answer : Option C. choose his or her best payoff, taking into account the actions of all other players