-Brian and Matt Own the Only Two Bicycle Repair Shops

question 28

Multiple Choice

-Brian and Matt own the only two bicycle repair shops in town.Each must choose between a low price for repair work and a high price.The yearly economic profits from each strategy are indicated in Figure 11-12.The upper right side of each rectangle shows Brian's profits;the lower left side shows Matt's profits.Which of the following statements is correct for a one-trial game?

• A)The market equilibrium price is the high price.
• B)A market equilibrium price cannot be established unless Brian and Matt collude.
• C)A market equilibrium price cannot be established unless Brian or Matt engages in tit-for-tat strategy.
• D)A market equilibrium price cannot be established without repeated trials.
• E)The market equilibrium price is the low price.

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Definitions:

Legal Consideration

An essential element of a contract, referring to something of value promised to another when making an agreement.

Contract Was Formed

A statement indicating that an agreement meeting all legal requirements for enforceability (offer, acceptance, consideration) has been successfully established between parties.

Consideration Requirement

A fundamental principle in contract law that requires both parties involved in a contract to exchange something of value for the agreement to be legally binding.

Legal Value

Consideration or a benefit recognized by the law that supports a contract's enforceability.