0, 12, & 13 Exam- Requires Respondus LockDown Browser Time Left:0:26:06 Dalisia

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0, 12, & 13 Exam- Requires Respondus LockDown Browser Time Left:0:26:06 Dalisia Brown: Attempt 1 Question 9 (1 point) The accompanying table shows two firms. Each firm makes its decision without knowledge of the other firm's decision. The payoffs for each firm represent economic profits, and each firm strictly prefers more economic proft than less. If both firms were able to write a binding contract, this contract would specify that Bobbles.com agrees to produce bobbleheads and Bobbles R Us agrees to produce bobbleheads Babbles R' Us Produce 5,000 bebbleheads Produce 7,000 bobbleheads 76,000 109 000 Produce $84,000 22.000 5,000 Bobbies.comobleheds 7,000 $18.000 534,000 Produce $105 000 24,000 A) 5.000; 7.000 B) 7,000; 5,000 C) 7,000: 7.000 e D) 5.000: 5.000

Explanation / Answer

This is prisoner dilemma like situation here. Both firm can maximize their profits by cooperating, but without any written agreement, they would choosing less optimal strategies thereby reducing profits of both.

but if they enter into any legal agreement, they would be going with strategy ( 5000, 5000) .

Right answer is (D)

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