-The Only Two Firms in a Market Are Trying to Decide

question 94

Multiple Choice

-The only two firms in a market are trying to decide what price to charge.The payoff matrix for this duopoly game is shown above.The payoffs are thousands of dollars of economic profit.In the above game,in the Nash equilibrium,

• A) Firm A and Firm B are both making $40,000 in economic profit.
• B) Firm A and Firm B are both making $55,000 in economic profit.
• C) Firm A is making $60,000 and Firm B is making $55,000 in economic profit.
• D) Firm A and Firm B are both making $60,000 in economic profit.
• E) Firm A and Firm B are both making $35,000 in economic profit.

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Definitions:

Indirect Affiliation

A connection between entities through secondary or less direct relationships rather than a straightforward ownership or partnership link.

Accrual-Based Net Income

This is the measure of profitability that includes all earned revenues and incurred expenses within a reporting period, according to the accrual basis of accounting.

Initial Value Method

The procedure of accounting for an investment at its cost at the time of purchase without subsequent adjustment for changes in market value.

Dividends

Payments made to shareholders out of a corporation's profits as a return on their investment.