Table 17-22 Brian and Matt Own the Only Two Bicycle Repair Shops

question 522

Multiple Choice

Table 17-22
Brian and Matt own the only two bicycle repair shops in town. Each must choose between a low price for repair work and a high price. The annual economic profit from each strategy is indicated in the table. The profits are shown as (Matt, Brian) in each cell.
-Refer to Table 17-22. Which of the following statements is correct?

• A)Matt's dominant strategy is to charge a low price.
• B)Brian's dominant strategy is to charge a high price.
• C)The dominant strategy for both Brian and Matt is to charge a low price.
• D)Matt's dominant strategy is to charge a high price.

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Definitions:

Two-State

Usually references a model involving two possible outcomes or states, often used in finance to model investment under uncertainty.

Hedge Ratio

The ratio used to calculate the number of derivatives needed to hedge a particular risk exposure.

Hedge Ratio

A ratio used to measure the proportion of exposure that is protected from risk through hedging activities.

Dollar Change

The difference in the value of a financial instrument or market index between two points in time.