-Figure 11-13 Shows the Payoff Matrix for the Only Two

question 113

Multiple Choice

-Figure 11-13 shows the payoff matrix for the only two auto dealerships in a community,Jim's Autos and Tim's Autos.The matrix shows the profits that each firm would earn from choosing either a low price or a high price.In this example,

• A)both firms would be best off if they charged a low price
• B)there is no equilibrium to the market
• C)both firms would be best off if they charged a high price
• D)both firms will go out of business in the long run
• E)the market is more efficient than a perfectly competitive market

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Definitions:

Accounting Break-Even

The sales level that results in zero project net income.

Forecasting Risk

The possibility that errors in projected cash flows lead to incorrect decisions.

Projected Sales

An estimate of the amount of revenue that a company expects to generate in a future period.

Sensitivity Analysis

Investigation of what happens to NPV when only one variable is changed.