Scenario: Consider the Tragedy of the Commons Problem

question 172

Multiple Choice

Scenario: Consider the tragedy of the commons problem. Suppose two firms (Row Inc. and Colm Inc.) are involved in a production process that exploits a natural resource. Each firm has two options: 1 and 2. The matrix below shows the game matrix for these two firms. The first number listed in each cell is the payoff to Row Inc., and the second number listed is the payoff to Colm Inc.

-Refer to the scenario above.If these two firms plan to operate in the long run,they will collectively be better off if ________.

• A) Row Inc. chooses Strategy 1, and Colm Inc. chooses Strategy 2
• B) Colm Inc. chooses strategy 1, and Row Inc. chooses Strategy 2
• C) both firms choose Strategy 2
• D) both firms choose Strategy 1

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Definitions:

Control

The process of gathering feedback to ensure that a plan is being properly executed or modified as circumstances change.

Budgets

Formal quantitative plans for the financial management of resources over a specified period, often used for controlling and directing resources.

Budgeted Income Statement

A financial report projecting revenue, expenses, and net income for a future period, based on management's expectations.

Budgeted Balance Sheet

A financial statement that projects the financial position of a company at a future date, showing expected assets, liabilities, and equity based on planned operations and initiatives.