-Refer to Figure 12

question 6

Multiple Choice

-Refer to Figure 12.3.The decision tree shows the payoffs for two firms based on the strategies they choose.If they agree to collude and hold prices at $10,and both stand by the agreement,each will earn profits of $5 million.If one firm cheats and the other does not,the firm that cheats will earn profits of $8 million and the other firm will have losses of $2 million.If they both cheat and cut prices,they will each earn profits of only $2 million.In this game,the dominant strategy for A is to

• A) cheat.
• B) stand by the agreement.
• C) cheat only if B cheats.
• D) maximize the maximum losses.

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Definitions:

Formal-Operational Thought

The stage in Jean Piaget's theory of cognitive development during which individuals develop the ability to think abstractly, logically, and systematically, typically beginning in adolescence.

Concrete-Operational Thought

A stage in cognitive development, as theorized by Piaget, where children can think logically about concrete events.

Symbolic Function

The ability to use symbols, signs, or objects to represent something that is not physically present.

Preoperational Thought

A stage in Jean Piaget's theory of cognitive development, occurring roughly between the ages of 2 and 7, characterized by symbolic thinking, egocentrism, and a lack of logical operations.