Acme Company Has Three Identical Manufacturing Plants,one on the Texas

question 19

Multiple Choice

Acme Company has three identical manufacturing plants,one on the Texas Gulf Coast,one in southern Alabama,and one in Florida.Each plant is valued at $50 million.Acme's risk manager is concerned about the damage which could be caused by a single hurricane.The risk manager believes there is an extremely low probability that a single hurricane could destroy two or all three plants because they are located so far apart.What is the probable maximum loss associated with a single hurricane?

• A)$0 million
• B)$50 million
• C)$100 million
• D)$150 million

---

Definitions:

Credible Threat

A promise of negative consequences that is believable and likely to influence behavior in strategic situations.

Collusive Agreements

Refers to arrangements between firms to limit competition, fix prices, or divide markets among themselves, often leading to higher prices for consumers.

Dominant Firm

A company with a major share of market sales, which has the power to influence market conditions and pricing.

Nash Equilibrium

A concept in game theory where no player can benefit by changing strategies while the other players keep theirs unchanged, leading to a stable state of the game.