MrSmith Wants to Go on a Vacation with His Wife

question 27

Multiple Choice

Mr.Smith wants to go on a vacation with his wife.Mrs.Smith wants to go to a beach.He,however,wants to go trekking in the hills.The payoff matrix given below shows the units of satisfaction derived in each situation.The first number listed in each cell is the payoff to Mr.Smith,and the second number listed is the payoff to Mrs.Smith.

This game has ________.

• A) multiple dominant strategy equilibria
• B) multiple Nash equilibria
• C) only one Nash equilibrium
• D) only one dominant strategy equilibrium

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Definitions:

Monopolistic Competition

A market structure characterized by many sellers offering differentiated products, leading to some degree of market power.

Average Total Cost

The total cost of production (fixed and variable costs combined) divided by the number of units produced.

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenue, often indicating the degree of profitability beyond normal expectations.

Excess Capacity

A situation where a company can produce more goods than the market demands, often leading to inefficiencies.