Use the Following to Answer Questions

question 116

Multiple Choice

Use the following to answer questions:
Scenario: Betty's Cookie Shop
Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay Betty $100,000 to come to work for them. She also knows she could sell her cookie shop for $150,000. The bank in town pays an annual interest rate of 3% on all funds deposited with it.
-(Scenario: Betty's Cookie Shop) Given the information provided, Betty's implicit costs are:

• A) her salary if she worked elsewhere and interest she forgoes by not selling her shop and putting the money in the bank.
• B) the cost of labor, equipment, and raw materials.
• C) the revenue she receives from selling her cookies plus the cost of labor, equipment, and raw materials.
• D) revenue she receives from selling her cookies and her labor costs.

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Definitions:

Nash Equilibrium

A concept in game theory where each player's strategy is optimal, given the strategies of other players, and no player has an incentive to deviate unilaterally.

Positive Constants

Fixed values greater than zero used in mathematical equations or expressions.

Payoffs

The returns or outcomes received from a particular action or investment.

Dominant Strategy Equilibrium

A situation in game theory where each participant's best strategy remains constant regardless of what strategies others choose.