Below Is a Profit Pay-Off Matrix for Two Oligopoly Firms

question 114

Multiple Choice

Below is a profit pay-off matrix for two oligopoly firms: Calvin Inc.and Hobbs Ltd.Calvin's profits are shown in the upper portion of each box and Hobb's are in the lower portion.

-Refer to the information above to answer this question.Which of the following statements is correct if no agreement between Calvin and Hobbs is in place and each is considering what to do in terms of its advertising budget?

• A)If Calvin adopts a high advertising budget,then Hobbs should adopt a low budget.
• B)If Calvin adopts a high advertising budget,then Hobbs should also.
• C)If Calvin adopts a low advertising budget,then Hobbs should also.
• D)If Hobbs adopts a low advertising budget,then Calvin should also.

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Definitions:

Maturities

The set dates when the principal amount of a debt instrument, such as a bond, is due to be paid back to the investor.

Bond Prices

The market value of a bond, which inversely changes with interest rates.

Subordinated Debt

Debt with a lower priority for the payment of interest and principal than other (senior) debt.

Senior Debt

Senior debt is a loan or bond that takes priority over other unsecured or junior debt owed by the issuer.