Refer to the Above Payoff Matrix

question 94

Multiple Choice

Refer to the above payoff matrix.Assume that firm B adopts a low-price strategy while firm A maintains a high-price strategy.Compared to the results from a high-price strategy for both firms,firm B will now:

• A) lose $75 million in profit and firm A will gain $50 million in profit.
• B) gain $50 million in profit and firm A will lose $50 million in profit.
• C) gain $75 million in profit and firm A will lose $50 million in profit.
• D) gain $50 million in profit and firm A will lose $75 million in profit. The high-price strategy results in $500 million profits for both.If B adopts a low-price strategy and A stays with the high-price strategy,B will gain and A will lose.

---

Definitions:

Bad Debt Expense

An expense reported on the income statement, representing the estimated amount of receivables that a company does not expect to collect.

Receivable

Money owed to a company by its customers or other parties for goods or services that have been delivered or used but not yet paid for.

Year of Sale

The specific calendar year in which a sale transaction of goods, services, or assets is completed.

Credit Terms

The conditions under which credit will be extended to a customer, including payment deadlines and discounts for early payment.