If you advertise and your rival advertises, you each will earn $3 million in profits. If neither of you advertises, you will each earn $7 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $10 million and the non-advertising firm will earn $1 million. If you and your rival plan to be in business for 15 years, then the Nash equilibrium is for:
A. neither firm to advertise in early years, but to advertise in later years.
B. you and your rival to advertise every year.
C. each firm to advertise in early years, but not advertise in later years.
D. you and your rival to not advertise in any year.
Answer: B
You might also like to view...
Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because
a. with shortages and waiting lists, they have no incentive to maintain and improve their property. b. they become resigned to the fact that many of their apartments are going to be vacant at any given time. c. with rent control the government guarantees landlords a minimal level of profit. d. with rent control it becomes the government's responsibility to maintain rental housing.
Tom, the manager and owner of a small company, believes in the signaling theory of education, not the human capital theory. As such, Tom would be most likely to agree with which of the following quotes?
a. "We encourage our employees to enroll in night classes to improve their on-the-job productivity.". b. "We encourage our employees to participate in online seminars to learn new skills.". c. "We pay higher wages to employees who have MBAs because, on average, their job performance is better than similar employees who do not have MBAs.". d. "When we interview prospective employees at job fairs, we are looking for college graduates because they have the determination and follow-through to finish what they start.".
Which of the following is FALSE?
A) Current account deficits must be financed through inflows of capital. B) Loans from abroad add to a country's stock of external debt and generate debt service. C) Borrowed funds are always used in a manner that contributes to the expansion of the country's productive capability. D) Debt service can become an unsustainable burden that holds back development.
Total cost divided by the total number of inputs is called:
a. marginal cost b. average cost c. total cost d. variable cost