Unlock hundreds more features
Save your Quiz to the Dashboard
View and Export Results
Use AI to Create Quizzes and Analyse Results

OR
Sign inSign in with Facebook
Sign inSign in with Google
Quizzes > Social & Behavioral Sciences

Microeconomic Theory II Quiz

Free Practice Quiz & Exam Preparation

Difficulty: Moderate
Questions: 15
Study OutcomesAdditional Reading
3D voxel art representing the Microeconomic Theory II course content

Practice your skills with our engaging Microeconomic Theory II quiz designed for students diving deep into the world of game theory and mechanism design. This quiz covers key concepts such as information and incentives, non-cooperative and dynamic games, as well as auctions, matching, and network analysis - offering an essential review to boost your understanding of complex economic problems.

What is the defining characteristic of a non-cooperative game?
A game where players cannot form binding agreements and act independently.
A game where one player's actions do not affect the others.
A game where players form binding agreements to coordinate strategies.
A game where players collaborate to maximize the total benefit.
Non-cooperative games are defined by the absence of enforceable agreements among players, meaning each player selects their strategy independently. This independence is central to analyzing strategic behavior in such settings.
In a static game, what best describes a dominant strategy?
A strategy that is optimal only when the opponents choose similar strategies.
A strategy that maximizes an opponent's payoff.
A strategy that minimizes losses if opponents deviate.
A strategy that yields the highest payoff regardless of what other players choose.
A dominant strategy is one that results in the best payoff for a player, independent of the strategies chosen by others. This concept is fundamental in analyzing outcomes in static games.
Which of the following best defines a Nash equilibrium?
An outcome characterized by complete randomness in players' choices.
An outcome where each player's strategy is optimal given the strategies chosen by others.
An outcome where one player dictates the strategies of the others.
An outcome where players maximize their collective payoff.
A Nash equilibrium occurs when no player can improve their payoff by unilaterally deviating from their strategy. It represents a stable state in strategic interactions.
Which auction format encourages bidders to reveal their true valuations?
Second-price (Vickrey) auction.
English auction.
First-price sealed-bid auction.
Dutch auction.
The second-price or Vickrey auction incentivizes truthful bidding since the winner pays the second-highest bid. This design aligns incentives so that bidding one's true value maximizes expected payoff.
What is the main objective of mechanism design in economics?
To develop market institutions that maximize group welfare by manipulating prices.
To construct economic mechanisms that incentivize agents to reveal private information truthfully.
To predict market outcomes based solely on public information.
To enable players to form binding agreements that ensure cooperation.
Mechanism design focuses on creating rules and structures that lead agents to act in ways that reveal their true preferences and information. This is key to achieving desirable and efficient outcomes in environments with private information.
In a dynamic game with complete information, why is backward induction used as a solution method?
It determines subgame perfect equilibria by analyzing the game from the final decision point backwards.
It focuses solely on eliminating dominated strategies at the beginning of the game.
It allows players to ignore future consequences of current decisions.
It prioritizes randomization over strategic planning in initial moves.
Backward induction works by solving the game starting at the terminal nodes and proceeding backwards, ensuring that strategies form a subgame perfect equilibrium. This method guarantees that each player's decisions are optimal at every stage of the game.
Which condition is necessary to ensure the existence of a Nash equilibrium in mixed strategies for a finite game?
All players must have complete and perfect information.
The players must have continuous payoff functions.
The game must have a finite number of players and strategies.
Every player must have a dominant pure strategy.
Nash's theorem assures that a mixed strategy Nash equilibrium exists in any finite game. The key requirement here is finiteness, which allows the use of fixed-point theorems in the proof of equilibrium existence.
In mechanism design, what does 'incentive compatibility' ensure?
That the outcome is independent of the private information provided.
That every participant's best action is to truthfully reveal their private information.
That every participant maximizes their payoff by misrepresenting their private information.
That penalties are imposed if a participant reveals their private information.
Incentive compatibility is a core concept in mechanism design, ensuring that each participant's optimal strategy is to act truthfully. This guarantees that the mechanism can function effectively even when agents have private information.
What bidding strategy is typically optimal for participants in a first-price sealed-bid auction?
Bidding above their true value to secure a win.
Bidding below their true value to maximize surplus while avoiding the winner's curse.
Bidding their true value.
Bidding randomly to confuse competitors.
Bidders in a first-price auction typically shade their bids, meaning they bid below their true value. This strategy balances the desire to win against the need to keep the payment low, thereby avoiding the winner's curse.
What is the primary objective of a matching market mechanism?
To achieve a stable allocation where no two agents can form a mutually beneficial deviation.
To randomize pairings to ensure fairness.
To prioritize speed over the quality of matches.
To maximize profits for the matching platform.
Matching mechanisms are designed to produce stable outcomes, where no pair of agents would prefer to deviate from their assigned match. Stability in matches is critical to prevent post-assignment adjustments that could harm overall efficiency.
In repeated games, which strategy is known for effectively sustaining cooperation among players?
Random strategy, choosing moves arbitrarily in each round.
Always defect strategy, consistently choosing not to cooperate.
Minimax strategy, focusing solely on minimizing the maximum loss.
Tit-for-tat, where a player replicates the opponent's previous move.
The tit-for-tat strategy is celebrated for its simplicity and effectiveness, as it rewards cooperation and retaliates against defection. This reciprocal approach helps sustain mutual cooperation over repeated interactions.
How does the concept of 'common knowledge' affect decision-making in strategic settings?
It ensures all players have identical payoff functions.
It allows players to perfectly predict opponents' future strategies.
It implies that all players know the game structure and that this fact is mutually recognized at all levels.
It removes the influence of private information entirely.
Common knowledge means that all players are aware of the game's structure and payoffs, and importantly, they know that all other players have this same understanding. This layered awareness is crucial in shaping strategic decisions and equilibrium outcomes.
Within network theory, what is the main focus when analyzing economic interactions?
Analyzing only the temporal evolution of a single market.
Investigating liquidity aspects in financial networks exclusively.
Examining individual production functions in isolation.
Studying externalities and how the connections among agents affect overall outcomes.
Network theory focuses on the interdependencies created by the links between agents, highlighting how these connections can produce externalities. Such analysis is key to understanding the diffusion of information and the propagation of shocks within an economic system.
What distinguishes a subgame perfect equilibrium from a standard Nash equilibrium in dynamic games?
It applies only to games with simultaneous moves.
It focuses exclusively on the initial move of the game.
It requires that strategies form a Nash equilibrium in every subgame of the original game.
It disregards the credibility of strategies in off-path contingencies.
A subgame perfect equilibrium refines the Nash equilibrium by demanding that the strategy profile constitutes a Nash equilibrium in every subgame. This ensures that the strategies are credible and robust throughout the entire dynamic process.
Which statement best encapsulates the Revelation Principle in mechanism design?
It requires that all players disclose their full set of strategies to each other.
It implies that private information is irrelevant for designing mechanisms.
It only applies to static settings and ignores dynamic incentive issues.
Every outcome achievable by some mechanism can also be implemented by a mechanism in which agents truthfully report their private information.
The Revelation Principle simplifies the analysis of mechanism design by showing that for any outcome achieved via some mechanism, there exists a direct mechanism where truth-telling is optimal. This focus on truthful reporting simplifies both the design and analysis of mechanisms under incentive compatibility constraints.
0
{"name":"What is the defining characteristic of a non-cooperative game?", "url":"https://www.quiz-maker.com/QPREVIEW","txt":"What is the defining characteristic of a non-cooperative game?, In a static game, what best describes a dominant strategy?, Which of the following best defines a Nash equilibrium?","img":"https://www.quiz-maker.com/3012/images/ogquiz.png"}

Study Outcomes

  1. Analyze strategies in non-cooperative and dynamic games.
  2. Apply mechanism design principles to develop incentive-compatible solutions.
  3. Evaluate economic outcomes using auction and matching theory.
  4. Interpret network effects in shaping strategic interactions.
  5. Synthesize theoretical concepts with mathematical models in incentive-based settings.

Microeconomic Theory II Additional Reading

Here are some top-notch resources to supercharge your understanding of microeconomic theory:

  1. MIT OpenCourseWare: Microeconomic Theory II This course offers an introduction to noncooperative game theory, covering topics like dynamic games, mechanism design, and auctions. It includes problem sets and exams to test your knowledge.
  2. Microeconomic Foundations II by David M. Kreps This book delves into agency theory, market signaling, relational contracting, bilateral bargaining, auctions, matching markets, and mechanism design, providing a solid foundation for advanced microeconomic concepts.
  3. Econ 533 Handouts by Blake Riley A collection of handouts covering static and dynamic games, repeated games, social choice, mechanism design, and auction theory, tailored for Microeconomic Theory II students.
  4. Teaching Materials by Leigh S. Tesfatsion A treasure trove of self-study materials, including resources on game theory, auction market design, and network analysis, perfect for deepening your understanding of microeconomic topics.
  5. Dynamic Games in Empirical Industrial Organization This paper surveys models, econometrics, and empirical applications of dynamic games, discussing Markov Perfect Nash Equilibrium and its extensions, offering insights into real-world applications.
Make a Quiz (FREE) Copy & Edit This Quiz Create a Quiz with AI

Social & Behavioral Sciences Quizzes

Powered by: Quiz Maker