Two Stores Are Located Side by Side

question 22

Multiple Choice

Two stores are located side by side.They attract customers to each other and to themselves by advertising.The profit functions of the two stores are (45 + x₂) x₁ - 2x²₁ for store 1 and (90 + x₁) x₂ - 2x²₂ for store 2, where x₁ and x₂ are total advertising expenditures by stores 1 and 2 respectively.If each store sets its advertising expenditures independently (as in Nash equilibrium) , how much would store 1 spend on advertising?

• A)$18
• B)$20
• C)$15
• D)$23
• E)None of the above.

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Definitions:

Live In Poverty

This describes individuals or households whose income falls below a certain poverty line, indicating a lack of sufficient resources to meet basic living expenses.

Percentage Points

Percentage points are used to express an absolute difference between two percentages, emphasizing the distinction between percentage changes.

Total Income

The sum of all earnings obtained from labor, capital investments, and any other source before any taxes or deductions are applied.

Income Distribution

The way in which a nation’s total GDP is distributed amongst its population, affecting the economic well-being of its citizens.