If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non-advertising firm will earn $5 million. Which of the following is true?
A. A dominant strategy for firm A is to advertise.
B. A Nash equilibrium is for both firms to advertise.
C. A dominant strategy for firm B is to advertise.
D. None of the answers is correct.
Answer: D
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External shocks can
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If a natural monopoly faces a relatively inelastic consumer demand over the range of the production, it will have an incentive to:
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As you move down the production possibility frontier, the absolute value of the marginal rate of transformation
A. increases. B. initially decreases, then increases. C. decreases. D. initially increases, then decreases.