Assume That in a Price-Fixing Game, If Player a Breaks

question 18

Multiple Choice

Assume that in a price-fixing game, if Player A breaks the agreement in the first year, she earns $11 while Player B earns $5.However, if Player A breaks the agreement once, Player B decides to break the agreement for eternity, leaving each to receive $8 per year for the rest of their lives.If they both keep the agreement each receives $9 per year for the rest of their lives.If the discount rate is 30 percent per period:

• A)Player A will prefer to break the agreement in the first year.
• B)Player A will prefer to break the agreement in the second year.
• C)Player A will prefer to keep the agreement throughout her life.
• D)Player A will prefer to keep the agreement only for the first five years.

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Definitions:

Bowman Capsule

A cup-like sac at the beginning of the tubular component of a nephron in the kidney that performs the first step in the filtration of blood to form urine.

Loop of Henle

A segment of the nephron in the kidney crucial for concentrating urine and conserving water.

Afferent Arteriole

The small artery that carries blood toward the capillaries in the glomerulus of the kidney.

Glomerulus

A network of capillaries located in the beginning of a nephron in the kidney where blood filtration takes place.