Consider These Two Investment Strategies: Strategy __________ Is the Dominant

question 37

Multiple Choice

Consider these two investment strategies: Strategy __________ is the dominant strategy because __________.

• A)1; it is riskless
• B)1; it has the highest reward/risk ratio
• C)2; its return is greater than or equal to the return of Strategy 1
• D)2; it has the highest reward/risk ratio

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Definitions:

Dominant Strategies

In game theory, a strategy is considered dominant if, regardless of what any other players do, the strategy earns a player a larger payoff than any other.

Joint Profits

The combined profits earned by two or more firms when they cooperate on a project or merge their operations.

Tacit Price Agreement

An unspoken understanding among competitors to set prices at a certain level without explicit communication.

Kinked Demand Curve

A demand curve in oligopoly market structures, characterized by a distinct bend or kink, indicating different elasticity above and below the current price.