The Accompanying Table Shows Two Firms in a Single-Stage Duopoly

question 128

Multiple Choice

The accompanying table shows two firms in a single-stage duopoly game. Each firm makes its decision without knowledge of the other firm's decision. The payoffs for each firm represent economic profits, and each firm strictly prefers more economic profit than less. This game would be considered a prisoner's dilemma if X is between ________. $\begin{array} { l }&\text { Tempurpedic }\\\text { Sealy }&\begin{array} { l }\quad\quad\text { Produce } 3,000 \text {mattresses }\quad\text { Produce } 4,000 \text { mattresses}\\\begin{array} { l } \text { Produce} \\ \text {3,000} \\ \text {mattresses } \\\\ \text { Produce} \\ \text { 4,000} \\ \text {mattresses } \\\end{array}\begin{array}{|l|l|}\hline \$25,000\quad\quad\quad&\$35,000\quad\quad\quad \\\\\$25,000&\$10,000\\\hline \$10,000&X\\\\\$35,000&X \\\\\hline\end{array}\end{array}\end{array}$

• A) $10,000 and $25,000
• B) $25,000 and $35,000
• C) $10,000 and $35,000
• D) $35,000 and $70,000
• E) $45,000 and $70,000

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Definitions:

Installment Note

A debt instrument that requires the borrower to make regular payments (installments) of principal and interest over a set period until the total debt is paid.

Journal Entry

A record in the books of accounts that represents a transaction and its effect on various accounts.

Interest Expense

The financial charge for an entity using borrowed capital over a time frame.

Notes Payable

Short-term or long-term liabilities representing amounts owed on written promises to pay a specific sum of money at a future date.