If You Advertise and Your Rival Advertises,you Each Will Earn

question 66

Multiple Choice

If you advertise and your rival advertises,you each will earn $5 million in profits.If neither of you advertises,you will each earn $10 million in profits.However,if one of you advertises and the other does not,the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million.Which of the following is true?

• A) A dominant strategy for firm A is to advertise.
• B) A dominant strategy for firm B is to advertise.
• C) A Nash equilibrium is for both firms to advertise.
• D) All of the statements associated with this question are correct.

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Definitions:

Factory Lunchroom

A designated area within a factory where workers can eat meals during breaks.

Sales Office

A designated space or area where sales activities and transactions are conducted.

Finished Goods Inventory

The stock of completed products that are ready to be sold but have not yet been sold.

Job Order Cost System

An accounting method that assigns costs to specific production batches or jobs, trackable by individual orders.