Use the Following to Answer Question

question 8

Multiple Choice

Use the following to answer question
Consider the following information for a simultaneous move game: Two discount stores (megastore and superstore) are interested in expanding their market share through advertising.The table below depicts the strategic outcomes (profits) of both stores with and without advertising.Payoffs for Megastore are in bold.

-The Nash equilibrium for both stores is

• A)For megastore to advertise and for superstore to advertise
• B)For megastore to advertise and for superstore not to advertise
• C)For megastore not to advertise and for superstore to advertise
• D)For megastore not to advertise and for superstore not to advertise

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Definitions:

Marginal Revenue

The boost in income achieved by selling one more unit of a product or service.

Marginal Cost

The growth in aggregate expenditure brought about by generating an extra unit of a product or service.

Economic Profit

The difference between total revenue and total costs, where costs include both explicit and implicit costs.

Competitive Firm

A company that operates in a market where it must take the prevailing market price as given because the firm's individual sales do not significantly affect the market price.