Consider the Following Game in Which Two Firms Decide How

question 34

Multiple Choice

Consider the following game in which two firms decide how much of a homogeneous good to produce. The annual profit payoffs for each firm are stated in the cell of the game matrix, and Firm A's payoffs appear first in the payoff pairs:

What are the dominant strategies in this game?

• A) Both firms produce low levels of output
• B) Both firms produce high levels of output
• C) Firm A's dominant strategy is to produce low levels of output, but Firm B does not have a dominant strategy.
• D) Firm B's dominant strategy is to produce low levels of output, but Firm A does not have a dominant strategy.
• E) Neither firm has a dominant strategy

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Definitions:

Gini Ratios

Measures of income inequality within a population, ranging from 0 (perfect equality) to 1 (perfect inequality).

Income Inequality

The uneven distribution of income within a population, where earnings are not equally distributed among individuals or groups.

Progressive Income Tax

A tax system where the tax rate increases as the taxable income of the taxpayer increases, aiming at a more equitable distribution of wealth.

After-Tax Lorenz Curve

A graphical representation that shows the distribution of income or wealth within an economy after accounting for taxes.