Table 14-5 Two Rival Oligopolists in the Athletic Supplements

question 63

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 the two firms collude,is there an incentive for either to cheat on the collusion agreement?

• A)No,neither firm can gain by cheating.
• B)Yes,but only Brawny Juice is in a position to gain by cheating.
• C)Yes,but only Power Fuel is in a position to gain by cheating.
• D)Yes,either firm can gain if it alone cheats.

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Definitions:

Days' Cash

A measure of a company's financial flexibility, indicating the number of days the company can continue to operate using only its cash on hand, without additional income or financing.

Petty Cash

Petty cash is a small amount of cash on hand used for paying expenses too small to merit writing a check or using a credit card.

Miscellaneous Expense

Expenses that are not classified under any standard expense categories within the accounting system, often of a small or irregular nature.

Days' Cash

A measure of a company's financial stability, indicating how many days the company can continue to operate using only its available cash without needing additional income.