Table 14-5 Two Rival Oligopolists in the Athletic Supplements

question 32

Multiple Choice

Table 14-5 Two rival oligopolists in the athletic supplements industry,the Power Fuel Company and the Brawny Juice Company,have to decide on their pricing strategy.Each can choose either a high price or a low price.Table 14-5 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts.
-Refer to Table 14-5.If Brawny Juice selects a high price,what is Power Fuel's best strategy and what will Power Fuel earn as a result of this strategy?

• A)Power Fuel will select a low price and earn $8 million.
• B)Power Fuel will select a low price and earn $16 million.
• C)Power Fuel will select a high price and earn $12 million.
• D)Power Fuel will select a high price and earn $16 million.

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Definitions:

Capacity Utilization Rate

A measure of how fully an industry or economy is using its total productive capacity.

Interest Rate

The portion of the loan that applies interest costs to the borrower, generally formulated as an annual percentage of the still outstanding loan amount.

Investment

The allocation of resources, usually money, in the expectation of generating an income or profit.

Gross Investment

The total amount spent on new capital assets before accounting for depreciation, reflecting an economy's investment levels.