Refer to the Following Figure

question 62

Multiple Choice

Refer to the following figure:

Two firms, A and B, produce similar, but not identical, products. BRA and BRB are, respectively, the reaction functions for firms A and B, which compete primarily by price.
-In Nash equilibrium,

• A) each firm has an incentive to increase price unilaterally.
• B) the two firms are maximizing joint profit.
• C) firm A charges $12 and firm B charges $16.
• D) each firm is maximizing its profit, given what the other is doing.
• E) both c and d

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Definitions:

Process Costing

Process costing is an accounting method used to determine costs in industries where production is continuous and units are indistinguishable from each other.

First-In, First-Out Method

An inventory valuation method where goods are sold in the order they are acquired or manufactured.

Equivalent Units

A concept in cost accounting used to assign a cost to partially completed goods, converting them into the amount of completed units' costs.

Conversion Costs

The costs directly associated with converting raw materials into finished products, typically including labor and manufacturing overhead.