Refer to the Normal-Form Game of Price Competition Shown Below

question 75

Multiple Choice

Refer to the normal-form game of price competition shown below. $\begin{array}{l}\quad\quad\quad\quad\quad\quad\text { Firm B}\\\text { Firm A}\begin{array}{|l|l|l|} \hline & \text { C } & \text { D }\\\hline & & \\ \text { A } & 0,7 & 5,2\\\hline & & \\\text { B } & 5,1 & 0,8 \\\hline\end{array}\end{array}$ Which of the following represents firm B's full strategy space?

• A) {A, C}
• B) {A, B}
• C) {(A, C), (A, D), (B, C), (B, D)}
• D) {C, D}

Identify characteristics and non-characteristics of perfectly competitive markets.

Recognize the role and implications of being a price taker versus a price maker in perfect competition.

Describe the demand curve faced by a perfectly competitive firm.

Explain the concept of standardized products in contrast to differentiated products in market structures.

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Definitions:

Maximin Strategy

In decision-making and game theory, a strategy which maximizes the minimum gain that can be achieved, focusing on the most favorable outcome of the worst possible scenarios.

Entry-Deterrence

Strategies employed by existing firms in a market to prevent or discourage new competitors from entering the market.

Sunk Costs

Expenses that have already been incurred and cannot be recovered, often considered in decision-making processes.

Price War

A competitive strategy in which retailers reduce prices to gain business, often leading to lower profit margins for the competitors.