Refer to the following payoff matrix:
$\begin{array}{r}
\text { Player } 2\
\text { Player } 1
\begin{array}{|l|l|l|}
\hline& \text { Low } Q & \text { High } Q \
\hline & & \
\text { Low } Q & \$ 10, \$ 35 & \$ 25, \$ 30 \
\hline & & \
\text { High } Q & \$ 30, \$ 7 & \$ 20, \$ 6\
\hline
\end{array}
\end{array}$ If the payoff matrix is a simultaneous-move production game,the Nash equilibrium is for:
A) both players to produce low output.
B) both players to produce high output.
C) player 1 to produce low output and player 2 to produce high output.
D) player 1 to produce high output and player 2 to produce low output.

Question

Refer to the following payoff matrix:
$\begin{array}{r}
\text { Player } 2\
\text { Player } 1
\begin{array}{|l|l|l|} 
\hline& \text { Low } Q & \text { High } Q \
\hline & & \
\text { Low } Q & \$ 10, \$ 35 & \$ 25, \$ 30 \
\hline & & \
\text { High } Q & \$ 30, \$ 7 & \$ 20, \$ 6\
\hline
\end{array}
\end{array}$ If the payoff matrix is a simultaneous-move production game,the Nash equilibrium is for:
A) both players to produce low output.
B) both players to produce high output.
C) player 1 to produce low output and player 2 to produce high output.
D) player 1 to produce high output and player 2 to produce low output.

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is the best response to the other player's strategy. Here, if Player 2 chooses Low Q, Player 1's best response is High Q ($30 > $10). If Player 2 chooses High Q, Player 1's best response remains High Q ($20 > $25). For Player 2, if Player 1 chooses Low Q, the best response is Low Q ($35 > $30). If Player 1 chooses High Q, Player 2's best response is Low Q ($7 > $6). Thus, the Nash equilibrium is where Player 1 chooses High Q and Player 2 chooses Low Q.

Refer to the Following Payoff Matrix If the Payoff Matrix Is a Simultaneous-Move Production Game,the Nash