5 (Table) Assume that firm A and firm B are oligopolies and both charge $20 for a product and face roughly the same costs. Firm A is considering a price decrease to $15. Profits for each firm are given in the payoff matrix (A's profits listed first, B's profits listed second) shown in the table. How will firm B react? Firm B's Price $20 Firm B's Price $15 $60,000 $120,000 $80,000 $80,000 Firm A's Price $20 Firm A's Price $15 $100,000 $100,000 $120,000 $60,000 Firm B will lower its price to $15 and earn $80,000. Firm B will keep its price at $20 and earn $100,000. Firm B will keep its price at $20 and earn $60,000. Firm B will lower its price to $15 and earn $60,000. Panel Editor
5 (Table) Assume that firm A and firm B are oligopolies and both charge $20 for a product and face roughly the same costs. Firm A is considering a price decrease to $15. Profits for each firm are given in the payoff matrix (A's profits listed first, B's profits listed second) shown in the table. How will firm B react? Firm B's Price $20 Firm B's Price $15 $60,000 $120,000 $80,000 $80,000 Firm A's Price $20 Firm A's Price $15 $100,000 $100,000 $120,000 $60,000 Firm B will lower its price to $15 and earn $80,000. Firm B will keep its price at $20 and earn $100,000. Firm B will keep its price at $20 and earn $60,000. Firm B will lower its price to $15 and earn $60,000. Panel Editor
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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