Refer to the Above Payoff Matrix for the Profits (In

question 141

Multiple Choice

Refer to the above payoff matrix for the profits (in $ millions) of two firms (A and B) and two pricing strategies (high and low) .Which of the following is the outcome of the dominant strategy without cooperation?

• A)Both firm A and firm B choose the low price.
• B)Both firm A and firm B choose the high price.
• C)Firm A chooses the low price while firm B chooses the high price.
• D)Firm A chooses the high price while firm B chooses the low price.

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Definitions:

Opportunity Cost

The expense associated with giving up the second-best choice in favor of opting for the preferred alternative in any decision-making process.

Production Possibilities Frontier

A graph that represents the highest possible production levels for two or more products, based on available inputs such as resources and labor.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision, crucial in evaluating the true cost of any economic choice.

Law of Increasing Costs

An economic principle stating that as the production of one good increases, the opportunity cost of producing an additional unit of this good also increases, assuming all resources are fully utilized.