In a Duopoly Game,we Observe the Following Payouts

question 20

Multiple Choice

In a duopoly game,we observe the following payouts.If the two firms collude they each make an economic profit of $50,000.If one firm cheats,then that firm makes an economic profit of $60,000 and the other incurs an economics loss of $10,000.If both firms cheat,then they both make zero economic profit.What is the Nash equilibrium?

• A)Both firms cheat.
• B)Neither firm cheats.
• C)One firm cheats but we don't know which one.
• D)Only the larger firm cheats.
• E)Only the smaller firm cheats.

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Definitions:

Straight-Line Method

A method of calculating depreciation or amortization by evenly distributing the cost of an asset over its useful life.

Premium on Bonds Payable

The excess amount over the face value for which a bond is sold, indicating that it was issued at a higher rate than its nominal value.

Discount on Bonds Payable

The difference by which a bond's market price is less than its principal amount or face value, effectively increasing the bond's yield.

Straight-Line Method

A method of depreciation where an asset's cost is evenly allocated over its useful life.