Use the Following to Answer Question 2- 4

question 11

Multiple Choice

Use the following to answer question 2- 4.
Consider the following information for a simultaneous move game: If you charge a low price (LP) and your rival charges a LP,you each will earn $5 million in profits.If both charge a high price (HP) ,each will each earn $10 million in profits.However,if one charge a LP and the other does not,the firm that charges a LP will earn $15 million and the other firm will earn $1 million.
-If both firms plan to be in business for 5 years,then the Nash Equilibrium will be

• A)For each firm charge a LP every year
• B)For neither firm to charge a LP in early years,but to charge a HP in later years.
• C)For each firm to charge a HP every year
• D)For neither firm to charge a HP in early years,but to charge a LP in later years.

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