Table 16-8 Two Cigarette Manufacturers (Firm a and Firm B) Are Faced

question 188

Multiple Choice

Table 16-8
Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses) . State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study. Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states.

-Refer to Table 16-8.When this game reaches a Nash equilibrium,profits for Firm A and Firm B will be

• A)$-5 and $-50, respectively.
• B)$-10 and $-10, respectively.
• C)$-20 and $-15, respectively.
• D)$-50 and $-5, respectively.