Exhibit 11-4
-Refer to Exhibit 11-4. If the game is played only once, each firm will price so that
A)one charges the monopoly price and the other charges the competitive price.
B)both charge the competitive price.
C)both firms make economic profits.
D)both charge the monopoly price.
E)one charges a substantially lower price than the other.

Question

Exhibit 11-4 
-Refer to Exhibit 11-4. If the game is played only once, each firm will price so that
A)one charges the monopoly price and the other charges the competitive price. 
B)both charge the competitive price. 
C)both firms make economic profits. 
D)both charge the monopoly price. 
E)one charges a substantially lower price than the other.

Quizplus · Accepted Answer

When firms are in a one-shot game, they tend to gravitate towards a Nash equilibrium where both firms choose strategies that are best responses to each other. In this context, without cooperation, both firms will likely set competitive prices to secure market share, leading to both charging the competitive price. This outcome is due to the incentive to undercut the monopoly price to attract more customers, assuming rational behavior and no collusion.

Exhibit 11-4 -Refer to Exhibit 11-4. If the Game Is Played Only