Two Stores Are Located Side by Side

question 9

Multiple Choice

Two stores are located side by side. They attract customers to each other and to themselves by advertising. The profit functions of the two stores are (45 + x₂) x₁ - 2x²₁ for store 1 and (75 + x₁) x₂ - 2x²₂ for store 2, where x₁ and x₂ are total advertising expenditures by stores 1 and 2 respectively. If each store sets its advertising expenditures independently (as in Nash equilibrium) , how much would store 1 spend on advertising?

• A) $14
• B) $19
• C) $22
• D) $17
• E) None of the above.

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Definitions:

Sound-Localizing Ability

The capacity of an organism to determine the origin or source of a sound, which is important for navigation and predator avoidance.

Neonates

Newborn babies, especially those less than a month old.

Speech Sounds

The auditory symbols used in language communication, produced by the movement of the speech apparatus.

Axons

Long, threadlike parts of nerve cells along which impulses are conducted from the cell body to other cells.