Author Question: There are two firms that compete against each other and each needs to decide if they will undertake ... (Read 107 times)

renzo156 · **on:** Jun 29, 2018

There are two firms that compete against each other and each needs to decide if they will undertake research and development to improve their product.

The payoffs are as follows: If Firm 1 does undertake R&D then Firm 2 will earn 25 million if they also do R&D or 50 million if not If Firm 1 does not undertake R&D then Firm 2 will earn 2 million if they do R&D or 0 million if not If Firm 2 does undertake R&D then Firm 1 will earn 10 million if they also do R&D or 20 million if not If Firm 2 does not undertake R&D then Firm 1 will earn 2 million if they do R&D or 0 million if not Regarding this game, which of the following is TRUE? A) Only one will do R&D but we cannot say which one.
B) Both firms will do R&D.
C) Both firms will not do R&D.
D) Firm 1 will do R&D and Firm 2 will not.

Question 2

The figure above shows the market for cotton in Georgestan. The government regulates the market with a production quota set at 8 million pounds per year. The price of cotton in Georgestan is

A) 30 cents per pound.
B) 40 cents per pound.
C) 60 cents per pound.
D) 50 cents per pound.