-The Above Figure Shows the Payoff Matrix for Two Firms

question 8

Multiple Choice

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.If nobody owns the lake,then

• A) joint profits are zero.
• B) joint profits are maximized.
• C) joint profits are not maximized.
• D) the beach will not operate because of too much pollution.

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Definitions:

Output

The quantity of goods or services produced by a firm or economy.

Total Revenue Curve

A graphical representation that shows how total revenue changes as the quantity sold of a good or service changes, holding all other factors constant.

Marginal Revenue

The increase in revenue that results from the sale of one additional unit of output.

Price Elasticity

A gauge for assessing how changes in price affect the supply or demand volumes of a product.