QUESTION 47 The following payoff matrix shows the possible profits that each fir

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QUESTION 47 The following payoff matrix shows the possible profits that each firm will earn under different pricing strategies. The firms can choose to have lower prices in order to lure away customers from the competitors or higher prices in order to increase their profits. The profits are measured in million dollars. In the game, Flgure 9.5: Kellogg's Price High Price Low Price High K$60 General Mills Price Low K$20 m o a if General Mills prices high, Kellogg's is better off pricing high b.neither firm has a dominant stratcgy o c. if Kellogg's prices high, General Mills is better off pricing high d, if General Mills prices high, Kellogg's is better off pricing low O e. the Nash equilibrium is to keep prices high Figure 7-4 shows the relationship between the various costs of a perfectly competitive firm. In the figure, when the market price equals $105 and the firm sells 675 units of output, the firm QUESTION 48 Figure 7-4 Click Save and Submit to sqve and submit. Click Save All Answers to save all ansuers

Explanation / Answer

Ans is D

Both firms have dominant strategy as charging a lower price. Thus both firm should charge lower price irrespective of their opponent price. Thus Kellogg's should charge lower price because he gets payoff $110 whereas he received $60ml if he charge higher price given General Mills charge higher price

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