In a Duopoly Game,we Observe the Following Payouts

question 20

Multiple Choice

In a duopoly game,we observe the following payouts.If the two firms collude they each make an economic profit of $50,000.If one firm cheats,then that firm makes an economic profit of $60,000 and the other incurs an economics loss of $10,000.If both firms cheat,then they both make zero economic profit.What is the Nash equilibrium?

• A)Both firms cheat.
• B)Neither firm cheats.
• C)One firm cheats but we don't know which one.
• D)Only the larger firm cheats.
• E)Only the smaller firm cheats.

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Definitions:

Profit Contribution

The portion of total sales revenue that exceeds the total costs associated with the sale of products or services.

Fabrication Hours

The total hours spent on manufacturing or constructing an item or product.

Finishing Department

The section of a manufacturing process where the final production phases occur, often involving cleaning, polishing, and packaging.

Net Profit

The actual profit after all expenses and taxes have been deducted from total revenue.