Table 17-11 Only Two Firms, ABC and XYZ, Sell a Particular Product

question 105

Multiple Choice

Table 17-11
Only two firms, ABC and XYZ, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost.
-Refer to Table 17-11. How much less do each of these firms earn in the Nash equilibrium than if they jointly maximize profits?

• A)$5
• B)$10
• C)$15
• D)$20

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Definitions:

Contribution Margin Ratio

A financial metric that measures the proportion of sales revenue that exceeds variable costs, indicating how much of the revenue is available to cover fixed costs and generate profit.

Operating Income

Earnings from a company's principal business activity, excluding expenses and revenues from non-operational sources.

Operating Income

A measure of a company's earning power from ongoing operations, equal to revenues minus operating expenses, but before taxes and interest.

Margin Of Safety

Indicates the possible decrease in sales that may occur before an operating loss results.