The Following Table Shows Two Firms in a Single-Stage Game

question 138

Multiple Choice

The following table shows two firms in a single-stage game.Each firm makes its decision without knowledge of the other firm's decision.The payoffs for each firm represent economic profits,and each firm strictly prefers more economic profit than less.In the Nash equilibrium of this game,Pepsi earns a profit of ________ and Coca-Cola earns a profit of ________.

• A) $67.5 million; $67.5 million
• B) $30 million; $30 million
• C) $37.5 million; $75 million
• D) $75 million; $37.5 million
• E) $50 million; $50 million

---

Definitions:

Comparative Advantage

Comparative advantage occurs when a country can produce a good at a lower opportunity cost than another country.

Absolute Quantities

A term used to describe the total amount of a product, asset, or resource, measured independently and without comparison to other entities.

Free Trade

A policy to eliminate discrimination against imports and exports, allowing goods to move freely between countries without tariffs or quotas.

Comparative Advantage

The ability of an entity to produce a good or offer a service at a lower opportunity cost than its competitors.