The Figure Shown Represents the Choices and Payoffs (Company Profits)of

question 58

Multiple Choice

The figure shown represents the choices and payoffs (company profits) of two music shops-MiiTunes and The Rock Shop. MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices, in the hopes that a new business will not be able to compete at these prices. The Rock Shop is trying to decide whether or not it should enter the market.According to the figure, The Rock Shop:

• A)should enter the market, regardless of what MiiTunes chooses to do.
• B)should not enter the market, regardless of what MiiTunes chooses to do.
• C)does not have a dominant strategy.
• D)has more than one dominant strategy.

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Definitions:

Tax Depreciation

The depreciation expense allowed by taxation authorities that enables a taxpayer to recover the cost of property or assets.

Book Depreciation

The systematic allocation of the cost of a tangible asset over its useful life for accounting and tax purposes.

Tax Rate

The percentage at which an individual or corporation is taxed by the government on income or profits.

Income Tax Expense

The charge against earnings resulting from the tax owed by an entity on its taxable income, reflecting the cost of income taxes.