The Table Below Shows the Payoff Matrix in the Form

question 102

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.An industrial spy comes to firm B and offers to pay B in exchange for B's certain and enforceable promise to not invest.How much must the spy pay B?

• A) $0.
• B) At least $15 million.
• C) At least $35 million.
• D) At least $50 million.

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Definitions:

Time Value

The concept that money available today is worth more than the same amount in the future due to its potential earning capacity, often used in evaluating investment opportunities.

Inventory Control

The process of managing inventory levels, orders, sales, and deliveries to ensure the right quantity of stock is available at the right time.

Sales Rise

An increase in the amount of products or services sold by a business within a specific period.

Safety Stock

An inventory buffer to prevent stockouts, typically held to account for variability in demand or supply.