Question

Question 9 (2 points) Figure 17-5. Two companies, ABC and QRS, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. ABC's Decision Low price High price ABC's profit = $10 million ABC's profit - $14 reallion High price ORS's profit - $10 million QRSs profit - $4 million QRS'S Decision ABC's profit - $4 million ABC's profit - $6.5 million Low price QRS: profit - $14 million QRS's profit - $6.5 million Refer to Figure 17-5. The dominant strategy for ABC is to O charge a low price, and the dominant strategy for QRS is to charge a low price. O charge a low price, and the dominant strategy for QRS is to charge a high price. charge a high price, and the dominant strategy for QRS is to charge a high price. charge a high price, and the dominant strategy for QRS is to charge a low price.

Answer 1

• If QRS choose high price, ABC will choose low price because give them profit of $14 million among $10 million and $14 million.
• If QRS choose low price, ABC will choose low price because give them profit of $6.5 million among $4 million and $6.5 million.

Thus, dominant strategy of ABC is to choose low price no matter what QRS choose.

• If ABC choose high price, QRS will choose low price because give them profit of $14 million among $10 million and $14 million.
• If ABC choose low price, QRS will choose low price because give them profit of $6.5 million among $4 million and $6.5 million.

Thus, dominant strategy of QRS is to choose low price no matter what ABC choose.

Option A is correct.