Simon Fraser University
Fall 2012
Econ 302 Quiz
Section D200
Thursday Oct. 4, 2012
Due: end of the class, 9:20 am.
Write your name, SFU ID number, and tutorial section number on the exam booklet.
This is a closed-book exam. You may use a non-graphing calculator.
Please leave the room quietly if you finish and want to leave early. I will deduct
points off your quiz if you cause too much distractions to your neighbors.
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1. Multiple-choice / True-false (no penalty for wrong guesses)
(a) (2 points) A mixed strategy is a/an
(A) strategy profile, (B) action profiles, (C) probability distribution over actions, (D)
collection of numbers over action profiles, or (E) none of the above.
(b) (2 points) A Nash equilibrium
(A) always involves strictly dominated actions, (B) may not exist in a finite game, (C)
is a symmetric strategy profile, (D) makes a coarser prediction than ISD, or (E) none of
the above.
(c) (1 points) True or False: Quantity competition usually leads to a lower price than price
competition.
(d) (1 points) True or False: In a two-player game written out in the “matrix” form, Player
1 controls the columns, and Player 2 controls the rows.
For Problem 2 to 4 show all your work.
2. (8 points) The market (inverse) demand function for a good is P (q) = 18 − q. There
is a monopolist with a constant marginal cost of 2 for producing each unit of the good.
Assume that the government imposes a sales tax of 50%, and the sales tax does not impact
the monopolist’s cost. Calculate the monopolist’s price and quantity, and calculate the
corresponding consumer’s price.
3. (8 points) For the following game, (a) find the strategies that survive iterated deletions
of strictly dominated strategies (ISD), and (b) find all Nash equilibria (pure and mixed).
W
X
Y
Z
A 1, 2 -1, 1 -1, 0
8, 2
B
0, 0
1, 1
-1, 0
7, 1/3
C 2, -1 -1, 0
1, 1
10, 1/3
D 5, 3/2 0, 1 -1/3, 4
8, 2
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4. (8 points) The market (inverse) demand function for a good is P (q) = 18 − q. There
are 7 firms, each with a constant marginal cost of 2 for producing each unit of the good.
The 7 firms compete by setting their quantities of production, and the price of the good is
determined by the market demand function given the total quantity. Calculate the symmetric
pure-strategy Nash equilibrium in this game and the corresponding market price.
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