Figure 17-1. Two companies, ABC and XYZ, each decide whether to produce a high level of output or a low level of output. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.

-Refer to Figure 17-1.If this game is played only once,then the most likely outcome is that
A) both firms produce a low level of output.
B) ABC produces a low level of output and XYZ produces a high level of output.
C) ABC produces a high level of output and XYZ produces a low level of output.
D) both firms produce a high level of output.

Question

Figure 17-1. Two companies, ABC and XYZ, each decide whether to produce a high level of output or a low level of output. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.
 
-Refer to Figure 17-1.If this game is played only once,then the most likely outcome is that
A) both firms produce a low level of output. 
B) ABC produces a low level of output and XYZ produces a high level of output. 
C) ABC produces a high level of output and XYZ produces a low level of output. 
D) both firms produce a high level of output.

Quizplus · Accepted Answer

In a one-time game, firms are likely to choose the dominant strategy, which often leads to both producing a high level of output to maximize their individual payoffs.