The Managers of Alpha and Beta Must Make Repeated Advertising

question 50

Multiple Choice

The managers of Alpha and Beta must make repeated advertising decisions simultaneously at the beginning of every month.They choose either low or high levels of advertising expenditure.They both employ a discount rate of 2.5 percent per month. If Beta expects to get caught the first month it cheats,the present value of the benefits of cheating is

• A)$1,234
• B)$2,927
• C)$6,500/(1.025)
• D)$6,500/(1.025)²

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Definitions:

Recessions

A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

Personal Accountability

Personal accountability is the self-imposed responsibility of an individual to own their decisions, actions, and outcomes, and to openly acknowledge and learn from mistakes and successes.

Corporate Misdeeds

Wrongful or illegal actions committed by companies or their representatives.

Science

The systematic study of the structure and behavior of the physical and natural world through observation and experiment.