In 2008, a Former Intel Engineer Has Been Charged with Stealing

question 120

Multiple Choice

In 2008, a former Intel engineer has been charged with stealing trade secrets worth $1 billion. Intel owns 80 percent of the worldwide market for microprocessors, AMD has the rest. Conducting R&D is very expensive so suppose that each of these firms can either steal R&D or develop their own R&D. If both firms develop their own R&D, economic profit will be $50 million each. If one company steals R&D, that firm earns $100 million in economic profit while the other firm earns $10 million. If both firms steal R&D, each firm breaks even. What is NOT true about this game?

• A) The outcome will not be a dominant strategy equilibrium.
• B) A strategy is to steal R&D.
• C) A firm will make more profit if it steals R&D.
• D) A strategy is to conduct R&D.

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Definitions:

Curves

In various contexts, it refers to graphical representations that show a relationship between two or more variables or factors.

L-shaped Isoquant

A graphical representation in production theory showing combinations of input factors that yield the same output, where the shape indicates perfect substitutability between inputs up to a point, followed by no substitutability.

Perfect Substitutes

Goods or services that can be used in exact place of each other with no loss of utility to the consumer, often characterized by a constant marginal rate of substitution.

Production

The process of creating goods or services by combining various inputs like labor, raw materials, and machinery.