The Figure Shown Displays the Choices That Could Be Made

question 60

Multiple Choice

The figure shown displays the choices that could be made by two coffee shops: Starbucks and Dunkin' Donuts. Both companies are trying to decide whether or not to expand into a new area. The area can only handle one coffee shop's expansion, and the expansion of one shop will cause the other to lose some business. If both coffee shops expand, the market will become saturated and neither will do well. The payoffs for these shops are the additional profits (or losses) they will earn.If Dunkin' Donuts is able to use a commitment device that commits them to expansion, then Starbucks should:

• A)also expand.
• B)not expand.
• C)attempt to cooperate.
• D)convince Dunkin' Donuts not to expand.

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Definitions:

Economic Activities

Actions that involve the production, distribution, and consumption of goods and services in an economy.

Accounting Information

Data related to the financial transactions and status of an individual, business, or organization, used for reporting and decision-making purposes.

Net Income

The profit of a company after all expenses and taxes have been deducted from total revenue, indicating the company’s financial performance.

Owner Withdraw

Transactions where the owners withdraw cash or other assets from the business for personal use.