Refer to the Following Figure Showing the Reaction Functions of Oligopoly

question 31

Multiple Choice

Refer to the following figure showing the reaction functions of oligopoly firms A and B.

-If firm B expects firm A will run 2 ads, then firm B should run _____ ads in order to maximize its own profit.

• A) 1
• B) 3
• C) 5
• D) 6
• E) 7

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Definitions:

Machine-Hours

A measure of production time, calculated as the number of hours a machine is operated within a given period, used for allocating machine-related costs.

Manufacturing Overhead

All the costs associated with manufacturing a product that cannot be directly attributed to a specific unit of production, such as factory rent, utilities, and maintenance.

Machine-Hours

A measure of the number of hours a machine is operated in a given period.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products or job orders, based on a cost driver, calculated before the period begins.