The Economics of Game Theory

1. What is a dominant strategy?

A) A strategy that involves random decision-making.
B) A strategy that is always the best choice regardless of what the other players do.
C) A strategy that is rarely chosen by rational players.
D) A strategy that leads to a Nash equilibrium.

2. What is imperfect information in game theory?

A) A situation where players always choose the Nash equilibrium.
B) A situation where players do not have complete knowledge about other players' strategies.
C) A situation where players never make mistakes.
D) A situation where players have perfect knowledge of the game.

3. What is a mixed strategy in game theory?

A) A strategy that involves randomization between different pure strategies.
B) A strategy that only leads to suboptimal outcomes.
C) A strategy where players cooperate with each other.
D) A strategy that is always the best choice.

4. What is a subgame-perfect equilibrium?

A) A strategy where players never change their decisions.
B) A strategy profile that represents a Nash equilibrium for each possible subgame of the larger game.
C) A strategy that guarantees the best possible outcome for all players.
D) A strategy that involves only dominant strategies.

5. What is the concept of rationality in game theory?

A) The assumption that players have complete knowledge of the game.
B) The assumption that players will act in their own best interest to maximize their payoff.
C) The assumption that players always make random decisions.
D) The assumption that players always cooperate with each other.

6. What is sequential rationality in game theory?

A) The concept that players make decisions based on the information available at the time of decision-making.
B) The concept that players make decisions simultaneously.
C) The concept that players always cooperate with each other.
D) The concept that players always choose the dominant strategy.

7. What is the concept of Pareto efficiency in game theory?

A) A situation where players cooperate to achieve the best outcome.
B) A situation in which players pursue their own self-interest at the expense of others.
C) A situation in which no player can be made better off without making another player worse off.
D) A situation where players make irrational decisions.

8. What is the concept of a dominant strategy equilibrium?

A) A situation in which all players have a dominant strategy that leads to a Nash equilibrium.
B) A situation where players cooperate to achieve the best outcome.
C) A situation that involves only random decisions.
D) A situation where players never change their strategies.

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