Use the Following to Answer Question 2- 4

question 16

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 the businesses last forever,then the Nash Equilibrium is

• A)for one firm to charge a HP forever
• B)for your firm charge a LP when the other firm does
• C)for each firm to charge HP until the rival does,and then to charge a LP forever.
• D)for each firm to charge LP until the rival does,and then to charge a HP forever.

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Definitions:

Allowance Method

An accounting technique that estimates and sets aside a portion of accounts receivable deemed likely uncollectible.

Uncollectible Receivables

Accounts receivable that the company does not expect to collect, often recognized as bad debt expense.

Settlement

The process of finalizing a transaction where the buyer pays the seller, and the seller transfers ownership of an asset, or the resolution of a dispute.

Maturity Value

The amount that will be paid to the holder of a financial instrument at the instrument's maturity date, including principal and any accrued interest.