This figure displays the choices being made by two coffee shops: Starbucks and Dunkin Donuts. Both companies are trying to decide whether or not to expand in an area. The area can handle only one of them expanding, and whoever expands will cause the other to lose some business. If they both expand, the market will be saturated, and neither company will do well. The payoffs are the additional profits (or losses) they will earn.According to the figure shown, if Dunkin Donuts expands, then Starbucks should:
A. give an ultimatum.
B. also expand their business.
C. not expand.
D. None of these statements is true.
Answer: C
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Answer the next question based on the following data. (These national income figures are in billions of dollars.)Personal consumption expenditures$4,500Consumption of fixed capital150Gross private domestic investment800Government purchases950Exports65Imports85GDP in this economy is ________.
A. $6,230 billion B. $6,380 billion C. $6,080 billion D. $6,400 billion
The effect on the IS curve of a reduction in taxes will be less the
A) flatter is the LM curve. B) steeper is the LM curve. C) greater the extent of "crowding out." D) greater is the marginal propensity to save.
If higher inflation ensues from a temporary negative supply shock, and in response, the central bank raises interest rates, then the resulting decrease in AD will return inflation back to its original level ________
A) and no further action will be required by the central bank B) but the ensuing positive output gap will lead to higher inflation once again so further interest rate increases will be required by the central bank to return inflation back to its long run level C) but the ensuing negative output gap will lead to short-run increases in AS and the central bank will have to "undo" its original interest rate hike in order to return inflation back to its target rate D) all of the above E) none of the above
An isoquant indicates different combinations of
A) two inputs that can be purchased for the same amount of money. B) two inputs that can produce the same amount of output. C) output that can be produced with the same amount of input. D) output that cost the same amount to produce.