This figure displays the choices and payoffs (company profits) of two music shops-MiiTunes and The Rock Shop. MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices, in the hopes that a new business will not be able to make a profit at such low prices. The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.According to the figure, if MiiTunes charges low prices, The Rock Shop should:
A. enter the market and lose $2 million.
B. enter the market and earn $4 million.
C. not enter the market and earn $0.
D. It cannot be determined what The Rock Shop will do.
Answer: C
Economics
You might also like to view...
When you buy a hamburger for lunch, you are using money as a
A) store of value. B) standard of deferred payment. C) medium of exchange. D) unit of accounting.
Economics
If the Fed reduces inflation 1 percentage point and this makes output fall 5 percentage points and unemployment rises 2 percentage points for one year, the sacrifice ratio is
a. 1/5. b. 2. c. 5/2. d. 5.
Economics