The above figure shows the payoff to two airlines, A and B, of serving a particular route.
If the two airlines must decide simultaneously, and the government imposes a 20 per firm tax on firms that service this route, which of the following maximizes the firms' joint profits? A) Neither firm services the route.
B) Firm A offers firm B 20 to not enter.
C) Both firms will service this route.
D) Firm B offers firm A 30 to not enter.
Question 2
Among the problems encountered when time series analysis is used to estimate cost functions is
A) that technological changes may have occurred.
B) that accounting changes may have occurred during the period analyzed.
C) that some costs are recorded on the books of account at a time other than when they are incurred.
D) All of the above
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