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

question 15

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. If both firms were able to write a binding contract, this contract would specify that Bobbles.com agrees to produce _________ bobbleheads and Bobbles R' Us agrees to produce _________ bobbleheads. $\begin{array} { l }&\text { Bobbles } R^{\prime} \text { Us }\\\text {Bobbles.com }&\begin{array} { l }\quad\quad\text { Produce } 5,000 \text { bobbleheads }\quad\quad\text { Produce } 5,000 \text { bobbleheads }\\\begin{array} { l } \text { Produce} \\ \text { 5,000} \\ \text {bobbleheads } \\\\ \text { Produce} \\ \text { 7,000} \\ \text {bobbleheads } \\\end{array}\begin{array}{|l|l|}\hline \$76,000\quad\quad\quad&\$109,000\quad\quad\quad \\\\\$84,000&\$22,000\\\hline \$18,000&\$34,000\\\\\$105,000&\$24,000 \\\\\hline\end{array}\end{array}\end{array}$

• A) 5,000; 7,000
• B) 7,000; 5,000
• C) 7,000; 7,000
• D) 5,000; 5,000
• E) 12,000; 0

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Definitions:

Sleep Disturbances

Varied issues related to sleeping, including difficulty falling or staying asleep, excessive sleepiness, or abnormal behaviors during sleep.

Sedative

A class of drugs that have a calming or tranquilizing effect, often used to treat anxiety or help with sleep.

Head Injury

A physical trauma to the head, often leading to brain damage or dysfunction.

Shift Worker

A person who works a work schedule outside the traditional 9 am to 5 pm due to the needs of the employer.