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:

Taxable Income

The amount of income that is subject to taxation, after all deductions and exemptions are applied.

Pension Plan

A financial program set by an employer to provide retirement income to employees.

Contractual Agreement

A legally binding contract that outlines the terms and conditions between parties.

Bond Financing

Raising capital for a business or governmental entity through the issuance of bonds, which are debt securities that must be repaid with interest.