Scenario: Two Factories Dump Their Waste in a River

question 158

Multiple Choice

Scenario: Two factories dump their waste in a river. This has led to the contamination of the water, which is also used by the factories in their production processes. The matrix below shows the profits of the two firms based on their respective decisions to dump their waste in the river. Note that each firm's choice affects the other firm's profit. The first number listed in each cell is the payoff to the row player, and the second number listed is the payoff to the column player.

-Refer to the scenario above.Which of the following is true?

• A) Firm 1's dominant strategy is not to dump its waste into the river.
• B) The dominant strategy equilibrium is the Nash equilibrium.
• C) The dominant strategy equilibrium is not the Nash equilibrium.
• D) Firm 2's dominant strategy is not to dump its waste into the river.

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Definitions:

Premium

In insurance law, the price paid by the insured for insurance protection for a specified period of time.

Fire Insurance Policy

A contract that provides compensation for damage or loss caused by fire to properties, subject to terms and conditions of the policy.

Ambiguous Clause

A provision in a contract or legal document that is unclear and open to multiple interpretations.

Liability

A financial obligation or responsibility that an individual or entity owes to another.