-Suppose Intel and AMD Can Each Charge Either $300 or $200

question 132

Multiple Choice

-Suppose Intel and AMD can each charge either $300 or $200 for a CPU (the computing unit of a computer) .The above table illustrates the payoffs,in millions of dollars,from each of the four possible outcomes that could occur in their duopoly setting.What must Intel's price be for AMD to earn $220 million in profit?

• A) $200
• B) $400
• C) $220
• D) either $300 or $400 because AMD earns $220 million in profit either way
• E) None of the above answers is correct because the payoff matrix shows that it is not possible for AMD to earn $220 million in profit

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Definitions:

Economic Profit

The difference between a firm's total revenue and its opportunity costs, including both explicit and implicit costs.

Output Produced

The total amount of goods or services produced by a firm, sector, or economy within a specific time period.

Regulated Monopoly

A market structure where a single firm dominates the market but its operations are overseen and controlled by government regulations to prevent abuse of its market power.

Productive Efficiency

A situation in which an economy or production process cannot produce more of one good without sacrificing the production of another good and without improving the production technology.