The Following Table Shows the Payoff Matrix of the Two

question 31

Multiple Choice

The following table shows the payoff matrix of the two firms (Firm X and Firm Y) in dollars when they advertise and when they do not advertise. Table 11.1 According to Table 11.1, if firm X advertises and Y does not advertise:

• A)Firm X earns $50 and firm Y earns $200.
• B)Firm X earns $150 and firm Y earns $200.
• C)Firm X earns $100 and firm Y earns $200.
• D)Firm X earns $50 and firm Y earns $180.
• E)Firm X earns $180 and firm Y earns $80.

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Definitions:

Dividend Decision

The process by which a company's board of directors decides the amount of profits to be distributed to shareholders and the amount to be retained.

Signaling Effect

The signaling effect is a theory in finance suggesting that the actions of a company, such as dividend announcements or share buybacks, send signals to the market about its future prospects.

Dividend Policy

A company's approach to distributing profits to its shareholders, determining how much to pay out in dividends and how often.

Investor Confidence

The degree of faith that investors have in the stability and profitability of the financial markets, influencing their willingness to invest.