The Table Below Shows the Payoff Matrix in the Form

question 88

Multiple Choice

The table below shows the payoff matrix in the form of short term profits for two firms,A and B,for two different strategies,investing in new capital or not investing in new capital.Payoffs are in millions of dollars. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Firm B }\\\text { Firm A }\begin{array}{|l|l|l|}\hline & \text { Invest } & \text { Not Invest } \\\hline {\text { Invest }} & \$ 20 \text { for } \mathrm{A} & \$ 70 \text { for } \mathrm{A} \\& \$ 20 \text { for } \mathrm{B} & \$ 5 \text { for } \mathrm{B} \\\hline {\text { Not Invest }} & \$ 5 \text { for } \mathrm{A} & \$ 50 \text { for } \mathrm{A} \\& \$ 70 \text { for } \mathrm{B} & \$ 50 \text { for B } \\\hline\end{array}\end{array}$
Refer to the figure above.For Firm A,_____ is its dominant strategy,and for Firm B,______ is its dominant strategy.

• A) investing;not investing
• B) not investing;investing
• C) investing;investing
• D) not investing;not investing

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Definitions:

Cost-Plus Approach

A pricing strategy where the selling price is determined by adding a specific markup to the cost of producing or purchasing the product.

Differential Profit

The change in profit resulting from choosing one option over another in decision-making processes.

Fixed Expenses

Costs that do not change with the level of production or sales activities, such as rent, salaries, and insurance.

Variable Factory Overhead

Expenses in a factory that vary with the level of production output, such as utility costs and materials.