Two Competitive Firms Are Located Side by Side

question 35

Multiple Choice

Two competitive firms are located side by side.If firm A advertises,firm B will get new customers too,even though it does not have to pay for the advertising cost.The same scenario is true for A if B advertises.If both advertise,the amount of extra revenue generated would just offset the advertising costs.This is a situation where there exists a

• A) dominant strategy.
• B) Nash equilibrium.
• C) prisoner's dilemma.
• D) collusive tendency.
• E) dominant decision tree.

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Definitions:

Economic Function

The role or purpose that an entity or phenomenon serves within the broader economy, such as production, distribution, or consumption.

Profits and Losses

Financial outcomes of a business's operations where profits represent the excess of revenues over expenses and losses reflect the opposite.

Distribution of Income

The way in which the total income earned in an economy is divided among its citizens or factors of production.

Resource Reallocation

The process of redistributing resources from less productive to more productive uses to increase overall efficiency or to meet strategic objectives.