Table 11-7 Table 11-7 Shows the Payoff Matrix for Walmart

question 236

Multiple Choice

Table 11-7
Table 11-7 shows the payoff matrix for Walmart and Target from every combination of pricing strategies for the popular PlayStation 4. At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-7.For each firm,is there a better outcome than the current situation in which each firm charges the low price and earns a profit of $7,000?

• A) Yes, the firms can implicitly collude and agree to charge a higher price.
• B) No, there is no incentive for each firm to consider any other strategy.
• C) No, any other strategy hurts consumers.
• D) Yes, each firm can implicitly agree to increase output and not to deviate from a low price.

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Definitions:

Specialization

The process by which individuals, firms, or countries focus on producing a certain type of goods or services, often to achieve greater efficiencies or quality.

Diseconomies of Scale

The situation where a company or business grows so large that the costs per unit increase, leading to decreased efficiency.

Long-run Total Costs

The total costs associated with the production of a certain level of output when all inputs can be varied, emphasizing the period in which no costs are fixed.

Diseconomies of Scale

Diseconomies of scale occur when a company or business grows to such a point that the costs per unit increase, opposite of achieving cost efficiencies through expansion.