Alice and Betsy Are Playing a Game in Which Each

question 18

Multiple Choice

Alice and Betsy are playing a game in which each can play either of two strategies, leave or stay.If both play the strategy leave, then each gets a payoff of $300.If both play the strategy stay, then each gets a payoff of $600.If one plays stay and the other plays leave, then the one who plays stay gets a payoff of $C and the one who plays leave gets a payoff of $D.When is the outcome where both play leave a Nash equilibrium?

• A)When $300 > C and D > $600 but not when $600 > D
• B)Never, since $600 > $300.
• C)Whenever D < $600.
• D)When D > C and C > $300.
• E)Whenever $300 > C

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Definitions:

Accrual Basis

A system in bookkeeping where earnings and expenses are documented at the point of transaction, not necessarily when cash exchanges hands.

Cash Basis

An accounting method that recognizes revenues and expenses only when cash is received or paid, as opposed to the accrual basis accounting.

Depreciation

The systematic allocation of the depreciable amount of an asset over its useful life, reflecting wear and tear, obsolescence, or loss of usefulness.

Plant And Equipment

Plant and Equipment refer to the long-term assets used in the operation of a business, excluding buildings or real estate, that contribute to the production process.