Table 16-16 Consider a Small Town That Has Two Grocery Stores from Stores

question 164

Multiple Choice

Table 16-16
Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2) .

-Refer to Table 16-16.What is grocery store 1's dominant strategy?

• A)Grocery store 1 does not have a dominant strategy.
• B)Grocery store 1 should always set a low price.
• C)Grocery store 1 should always set a high price.
• D)Grocery store 1 should set a low price when grocery store 2 sets a low price, and grocery store 1 should set a high price when grocery store 2 sets a high price.

---

Definitions:

Business Judgment Rule

A legal principle that protects corporate directors and officers from liability for decisions made in good faith and in the best interests of the corporation, even if the decisions are ultimately unsuccessful.

Insolvent

A financial state in which an individual or entity cannot meet its debt obligations as they come due because its liabilities exceed its assets.

Stock Warrants

Securities that give the holder the right to purchase company stock at a specified price before a certain date.

Redeemed

Refers to the act of repaying or buying back something, such as a financial security or a reputation.