Question

Table 17-18 This table shows a game played between two firms, Firm A and Firm B....

Table 17-18
This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B).

Firm B

Q=10

Q=12

Firm A

Q=10

(48, 48)

(20, 60)

Q=12

(60, 20)

(38, 38)

Refer to Table 17-18. The Nash equilibrium for this game is

a.

10 units of output for Firm A and 12 units of output for Firm B.
b.

12 units of output for Firm A and 10 units of output for Firm B.
c.

12 units of output for Firm A and 12 units of output for Firm B.
d.

10 units of output for Firm A and 10 units of output for Firm B.

Refer to Table 17-18. If these two firms agree to cooperate to maximize their joint profit, the outcome of the game will be

a.

12 units of output for Firm A and 12 units of output for Firm B.
b.

10 units of output for Firm A and 12 units of output for Firm B.
c.

10 units of output for Firm A and 10 units of output for Firm B.
d.

12 units of output for Firm A and 10 units of output for Firm B.
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Answer #1

Solution-

Refer to Table 17-18. The Nash equilibrium for this game is 12 units of output for firm A and 12 units of output for firm B.

The correct option is C. 12 units of output for firm A and 12 units of output for firm B.

Refer to Table 17-18. If these two firms agree to cooperate to maximize their joint profit, the outcome of the game will be 10 units of output for Firm A and 10 units of output for Firm B.

The correct option is C. 10 units of output for Firm A and 10 units of output for Firm B.


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