The Figure Shown Displays the Choices That Could Be Made

question 128

Multiple Choice

The figure shown displays the choices that could be made by Verizon and a new firm in the industry. The payoffs are the profits (in millions) these companies will earn as a result of their choices.What will be the outcome of this game?

• A)The new firm will expand; Verizon will advertise; the new firm will choose high prices.
• B)The new firm will expand; Verizon will advertise; the new firm will choose low prices.
• C)The new firm will expand; Verizon will not advertise; the new firm will choose high prices.
• D)The new firm will not expand.

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Definitions:

Monetary Policy

Actions taken by a central bank to control the money supply and interest rates in order to influence economic conditions, such as inflation and employment.

Ben Bernanke

A prominent American economist who served as the Chairman of the Federal Reserve from 2006 to 2014, known for his policies during the financial crisis of 2008.

Banging The Gong

A ceremonial act of ringing a gong, often used to signify the opening or closing of trading on a stock exchange.

Discount Rate

The charge applied by the Federal Reserve on loans provided to commercial banks and various financial establishments via its discount window.