Suppose Jordan and Lee Are Trying to Decide What to Do

question 79

Multiple Choice

Suppose Jordan and Lee are trying to decide what to do on a Friday.Jordan would prefer to see a comedy while Lee would prefer to see a documentary.One documentary and one comedy are showing at the local cinema.The benefit they receive from seeing the films either together or separately are shown in the payoff matrix.Both Jordan and Lee know the information contained in the payoff matrix.They purchase their tickets simultaneously,ignorant of the other's choice. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Jordan }\\\text {Lee}\begin{array}{|l|l|l|}\hline & {\text { Comedy }} & {\text { Documentary }} \\\hline \text { Comedy } & \begin{array}{l}\text { Lee: } 3 \\\text { Jordan: } 5\end{array} & \begin{array}{l}\text { Lee: } 1 \\\text { Jordan } 1\end{array} \\\hline \text { Documentory } & \text { Lee } 2 & \text { Lee: } 5 \\& \text { Jordan: } 2 & \text { Jordan 3 } \\\hline\end{array}\end{array}$
Refer to the figure above.Suppose Jordan picks first and chooses the comedy,which Lee observes,and then Lee chooses the comedy.The reason Lee chose the comedy is that:

• A) Lee receives a higher payoff choosing comedy when Jordan has chosen comedy.
• B) Lee must establish a reputation for keeping promises even if it is not in Lee's immediate self-interest to do so.
• C) selecting the comedy is Lee's dominant strategy regardless of Jordan's choice.
• D) this is a prisoner's dilemma,and so the players do best when choosing the same strategy.

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Definitions:

Flexible Budget

A budget model that modifies its allocations to reflect changes in operational activity levels, improving accuracy in financial planning and performance evaluation.

Budgeting Formulas

Mathematical expressions or rules used to plan and control income and expenditure, aiding in the preparation and implementation of budgets.

Manufacturing Overhead

All manufacturing costs except direct materials and direct labor.

Units

Basic quantifiable measures used to determine or express the amount of a product or service.