1:A dominant strategy

is one that is the best for a firm, no matter what strategies other firms use.

is one that a firm is forced into following by government policy.

involves colluding with rivals to maximise joint profits.

involves deciding what to do after all rivals have chosen their own strategies.

2Which of the following is NOT a characteristic of game theory?

Rules that determine what actions are allowable.

Payoffs that are the results of the interaction among players' strategies.

Strategies that players employ to attain their objectives.

Independence among players.

3Which of the following statements is true about monopolistically competitive firms?

Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers.

Like perfectly competitive firms, monopolistically competitive firms make homogenous goods.

Like perfectly competitive firms, monopolistically competitive firms maximise their profits by setting price equal to marginal cost.

Unlike perfectly competitive firms, monopolistically competitive firms face perfectly inelastic demand curves.

4For a firm to price discriminate, it must have

market power.

knowledge of what different consumers are willing to pay.

the ability to divide the market for the product and prevent resale between these segments.

All of the above.

5Scarcity exists when there are

unlimited resources.

an excess of supply.

constrained choices.

fear-mongering politicians.

6suppose a negative externality exists. If transactions costs are low and all parties are willing to negotiate, then, according to the Coase theorem

a solution can be reached only if property rights are given to the victims of pollution and not the polluters.

a solution can be reached only if property rights are given to polluters and not to the victims of pollution.

an efficient solution can be reached regardless of the initial assignment of property rights.

an equitable solution can be reached regardless of the initial assignment of property rights.

7The incentive for a firm to join a cartel is

to be able to earn profits in the long run but not in the short run.

to be able to earn larger profits than if it was not part of the cartel.

to completely insulate itself from competition.

to produce a larger amount of output than if it was not part of the cartel.

8What would shift the production possibility curve (PPC) to the right?

An increase in the number of people producing the goods.

An increase in infrastructure (factories and equipment).

An increase in technology and knowledge.

All of the above.

9Why is the Long Run Aggregate Supply curve vertical?

In the long run, we assume that no factors relevant to the long run output can change.

The natural level of output (Y^N) is constant in the long run where the inflation rate has always been perfectly anticipated and productivity has always equalled its trend.

Inflation is constant in the long run.

Consumption will automatically adjust to keep output in the long run at natural level (Y^N).

10: Which of the following is the M3 measure of the stock of money?

Currency plus current deposits at commercial banks.

Currency plus current deposits and other deposits at commercial banks plus deposits at other authorised deposit-taking institutions.

Currency plus current deposits at non-bank, authorised deposit-taking institutions.

Currency plus other RBA holdings.