Question

1. The advantage of game theory is that it allows us to focus on _____

a. each firm’s incentive to charge a higher price for its product.

b. the relationship between business and ethics in a market.

c. the costs and benefits of government regulation in a market.

d. the market share of each firm in a market.

e. each firm's incentives to cooperate or not to cooperate.

2. If a union negotiates a wage floor above the market equilibrium, each firm hiring union members faces _____

	a.	a perfectly elastic demand curve for labor.
	b.	a perfectly inelastic supply curve for labor.
	c.	a perfectly elastic supply curve for labor.
	d.	unit elastic demand curve for labor.
	e.	a perfectly inelastic demand curve for labor.

Answer 1

1. a. each firm’s incentive to charge a higher price for its product.

Explanation: Game theory helps in in understanding strategies and related payoffs by firms.