The Figure Shown Displays the Choices That Could Be Made

question 96

Multiple Choice

The figure shown displays the choices that could be made by two firms in an industry: Tesla and Ford. Both companies are trying to decide whether or not to invest in research and development. Tesla will make a decision first, and then Ford will make a decision after observing Tesla's choice. The payoffs are the profits (in millions) these companies will earn as a result of their choices.If these players act in their own self-interest, then Ford will earn:

• A)$40 million.
• B)$10 million.
• C)$50 million.
• D)$70 million.

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Definitions:

Positive

In the context of economic analysis, it often refers to a fact-based approach that attempts to describe how economic systems actually work without making judgments about their desirability.

Circular-Flow Diagram

A model that illustrates the movement of goods, services, and money between households and businesses in an economy.

Factor Market

A marketplace where services of the factors of production (labor, land, capital) are bought and sold.

Product Market

The marketplace where final goods or services are offered to consumers, businesses, and the government.