A Clothing Store and a Jeweler Are Located Side by Side

question 13

Multiple Choice

A clothing store and a jeweler are located side by side in a shopping mall. If the clothing store spends C dollars on advertising and the jeweler spends J dollars on advertising, then the profits of the clothing store will be (24 + J) C - C² and the profits of the jeweler will be (66 + C) J - 2J². The clothing store gets to choose its amount of advertising first, knowing that the jeweler will find out how much the clothing store advertised before deciding how much to spend. The amount spent by the clothing store will be

• A) 54.
• B) 81.
• C) 13.50.
• D) 27.
• E) 40.50.

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Definitions:

Fair Value Method

An accounting approach used to assess and assign a value to assets or liabilities based on current market prices or the estimated prices of similar transactions.

Net Income

The conclusive income of a corporation post all deductions for costs and taxes from its aggregate revenue.

Dividends

A share of profits paid out to shareholders by a corporation, usually in cash or in the form of more shares.

Trading Securities

These are securities that a company holds primarily with the intention of trading them in the short term to profit from price fluctuations.