Exhibit 9-6 Two-Firm Payoff Matrix
?
Suppose costs are identical for the two firms in Exhibit 9-6. Each firm assumes without formal agreement that if it sets the high price its rival will not charge a lower price. Under these "tit-for-tat" conditions, equilibrium will be established by:
A. Widget Co. charging the high price and Ajax Co. charging the low price.
B. Widget Co. charging the high price and Ajax Co. charging the high price.
C. Widget Co. charging the low price and Ajax Co. charging the low price.
D. Widget Co. charging the low price and Ajax Co. charging the high price.
Answer: B
You might also like to view...
In practice, the ECB has committed to what type of strategy for monetary policy?
A) inflation targeting B) monetary targeting C) unclear as to inflation or monetary targeting D) exchange rate targeting
The quantity that sellers wish to sell tends to ________ as price increases, and so the supply curve is ________ sloping.
A. decrease; upward B. increase; upward C. decrease; downward D. increase; downward
Advancements in information technology can be used to explain the
A. reductions in energy usage. B. increases in energy usage. C. productivity improvements in the United States. D. productivity slowdown of the early 2000s in the United States.
Suppose an individual experiences a $20,000 increase in real income and the individual believes this increase in income is permanent. Economic theory suggests that this individual's current consumption will
A) remain unchanged. B) increase by more than $20,000. C) increase by at most $20,000. D) decrease or remain unchanged, depending on the value of the real interest rate. E) decrease, remain unchanged, or increase, depending on the value of the real interest rate.