This Payoff Matrix Gives Potential Dollar Gain Values in Thousands

question 20

Multiple Choice

This payoff matrix gives potential dollar gain values in thousands for strategies S1, S2, S3, and S4 for Sam's Pizza and competitive strategies CA1, CA2, and CA3 for Pam's Pizza.If Sam chooses S3, how is he feeling about the business climate?

• A)Sam is feeling pessimistic because he has chosen a maximax strategy.
• B)Sam is feeling pessimistic because he has chosen a minimax strategy.
• C)Sam is feeling optimistic because he has chosen a maximax strategy.
• D)Sam is feeling optimistic because he has chosen a maximin strategy.

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Definitions:

Economic Profits

The financial gain achieved when the revenue from business activities exceeds the costs, expenses, and taxes needed to sustain the activity, including opportunity costs.

Purely Competitive Industries

Markets characterized by many buyers and sellers, homogeneous products, and free entry and exit, leading to price-taking behavior.

Cut-Throat Competition

Intense competition where competitors use aggressive tactics to undercut each other’s prices and gain market share.

Consumer Demand

The desire by consumers to purchase goods and services, quantified by the amount of a product people are willing to buy at certain price levels.