-The Above Figure Shows the Payoff to Two Airlines,A and B,of

question 1

Multiple Choice

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,and the government imposes a $20 per firm tax on firms that service this route,which of the following maximizes the firms' joint profits?

• A) Neither firm services the route.
• B) Firm A offers firm B $20 to not enter.
• C) Both firms will service this route.
• D) Firm B offers firm A $30 to not enter.

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Definitions:

Cost Of Debt

The effective rate that a company pays on its current debt, which can include bonds, loans, and other forms of debt; it's a crucial component in the calculation of the company’s cost of capital.

Debt Ratio

A financial ratio that measures the extent of a company’s leverage, calculated by dividing total liabilities by total assets.

Total Debt

The sum of all liabilities, both short and long term, that a company owes.

Cash In Hand

The amount of liquid money or physical currency that a company or individual has readily available.