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kodGreya [7K]
3 years ago
12

Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell Blu-ray players: Movietoni

a and Videotech. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its players.
Videotech Pricing
High Low
Movietonia Pricing High 11, 11 2, 15
Low 15, 2 8, 8
For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million and Videotech will earn a profit of $3 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit-maximizing firms.
1. If the firms do not collude, what strategies will they end up choosing?
2. The game between Movietonia and Videotech is an example of the prisoners' dilemma.
a. true
b. false
Business
1 answer:
Marina CMI [18]3 years ago
4 0

Answer:

pricing low

yes

Explanation:

Game theory looks at the interactions between participants in a competitive game and calculates the best choice for the player.

Dominant strategy is the best option for a player regardless of what the other player is playing.

Nash equilibrium is the best outcome for players where no player has an incentive to change their decisions.

if either firm charges high, they either earn 11 million or 2 million.

if either firm charges low, it would earn either 15 million or 8 million.

because the payoffs of charging low is higher than the payoffs of charging high, the best strategy is for the firms to charge low if there is no cooperation.

the game is a prisoners dilemma because the choice the firms make isn't the choice that will yield the highest payoffs. the choice that would yield the highest payoffs is to both charge high prices.

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Colton Enterprises experienced the following events for Year 1, the first year of operation:Acquired $37,000 cash from the issue
atroni [7]

Answer:

d1) Colton Enterprises

Income Statement

For the year ended December 31, Year 1

Service revenue                                       $76,000

Expenses:

  • Operating expenses $36,000
  • Wages expense $25,800
  • Rent expense $9,150                    <u> ($70,950)</u>

Net income                                                 $5,050

d2) Colton Enterprises

Changes in stockholders' equity

For the year ended December 31, Year 1

Beginning balance                               $0              

Common stocks issued                 $37,000          

<u> Net income                                       $5,050</u>          

Subtotal                                          $42,050        

<u> Dividends paid                                      $0    </u>      

Ending balance Dec. 31, year 1     $42,050

d3) Colton Enterprises

Balance Sheet

For the year ended December 31, Year 1

Assets:

Cash                                             $31,500

Accounts receivable                    $17,500

Prepaid rent                                  $3,050

Total assets                                 $52,050          

Liabilities:

Accounts payable                         $7,200

Wages payable                             $2,800

Total liabilities                             $10,000

Stockholders' Equity:

Common stock                           $37,000              

Retained earnings                        $5,050              

Total stockholders' equity         $42,050

Total liabilities + equity              $52,050        

d4) Colton Enterprises

Statement of cash flows

For the year ended December 31, Year 1

Cash flows from operating act.

Net income                                                                      $5,050

Adjustments to net income:

  • Increase in accounts payable $7,200
  • Increase in wages payable $2,800
  • Increase in accounts receivable ($17,500)
  • Increase in prepaid rent ($3,050)                       <u>($10,550)</u>

Net cash provided by OA                                             ($5,500)

Cash flows from investing act.                                            $0

Cash flows from financing act.

Issuance of common stocks                                        $37,000

Dividends paid                                                             <u>    $0        </u>

Net cash provided by FA                                             $37,000        

Net increase in cash                                                     $31,500              

Initial cash balance                                                       <u>    $0       </u>            

Ending cash balance                                                    $31,500  

Explanation:

Events for yer 1:

Acquired $37,000 cash from the issue of common stock.

Dr Cash 37,000

    Cr Common stock 37,000

Paid $12,200 cash in advance for rent. The payment was for the period April 1, Year 1, to March 31, Year 2.

Dr Prepaid rent 12,200

    Cr Cash 12,200

Performed services for customers on account for $76,000.

Dr Accounts receivable 76,000

    Cr Service revenue 76,000

Incurred operating expenses on account of $36,000.

Dr Operating expense 36,000

    Cr Accounts payable 36,000

Collected $58,500 cash from accounts receivable.

Dr Cash 58,500

    Cr Accounts receivable 58,500

Paid $23,000 cash for salary expense.

Dr Wages expense 23,000

    Cr Cash 23,000

Paid $28,800 cash as a partial payment on accounts payable.

Dr Accounts payable 28,800

    Cr Cash 28,800

Made the adjusting entry for the expired rent.

Dr Rent expense 9,150

    Cr Prepaid rent 9,150

Recorded $2,800 of accrued salaries at the end of Year 1.

Dr Wages expense 2,800

    Cr Wages payable 2,800

Events for Year 2

Paid $2,800 cash for the salaries accrued at the end of the prior accounting period.

Dr Wages payable 2,800

    Cr Cash 2,800

Performed services for cash of $25,000.

Dr Cash 25,000

    Cr Service revenue 25,000

Purchased $3,000 of supplies on account.

Dr Supplies 3,000

    Cr Accounts payable 3,000

Paid $11,100 cash in advance for rent. The payment was for one year beginning April 1, Year 2.

Dr Prepaid rent 11,100

    Cr Cash 11,100

Performed services for customers on account for $92,000.

Dr Accounts receivable 92,000

    Cr Service revenue 92,000

Incurred operating expenses on account of $43,500.

Dr Operating expenses 43,500

    Cr Accounts payable 43,500

Collected $91,000 cash from accounts receivable.

Dr Cash 91,000

    Cr Accounts receivable 91,000

Paid $41,000 cash as a partial payment on accounts payable.

Dr Accounts payable 41,000

    Cr Cash 41,000

Paid $31,700 cash for salary expense.

Dr Wages expense 31,700

    Cr Cash 31,700

Paid a $11,000 cash dividend to stockholders.

Dr Dividends 11,000

    Cr Cash 11,000

Adjusting entry for expired rent

Dr Rent expense 11,375

    Cr Prepaid rent 11,375

Dr Supplies expense 2,450

    Cr Supplies 2,450

5 0
3 years ago
A research company has conducted an evaluation of European online retailers by asking consumers how well the websites helped the
vlabodo [156]

Answer: Survey

Explanation:

In discipline such as the applied statistics, survey methodology is referred to as the process under which one studies sampling of an individual unit from the population and thus associated techniques or methods of the survey data collection, i.e. questionnaire construction. The survey methodology tends to include the instruments or the procedures which ask one or few more questions which may be answered.

5 0
3 years ago
You have $10,000 to invest. You want to purchase shares of Alaska Air at $42.56, Best Buy at $51.42, and Ford Motor at $8.56. Ho
abruzzese [7]

Answer:

Alaska  =   46.99 units

Best buy = 58.34 units

Ford Motor =  584.11 units

Explanation:

<em>To determine the unit of each class of stock to purchase, we wll multiply each of the percentages by the total fund to be arrive the proportion of fund to be invested in each class. </em>

<em>Further more, we will  divide the allocated amount by the share price  per unit</em>

Shares to be purchased to have the given proportion would be '

Alaska (20%)  =(20%× 10,000)/42.56=       46.99 units

Best buy (30%)   = (30% × 10,000)/ 51.42 = 58.34 units

Ford Motor (50%) = (50% × 10,000)/ 8.56 =  584.11 units

3 0
3 years ago
A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal
NemiM [27]

Answer:

It is a relatively easy method to apply.

Explanation:

When accounting for a subsidiary, equity method is followed, whenever the shareholding percentage is equal or more than 20%.

But here, the parent company uses, initial value method for internal reporting.

Under initial value method the value of investment in subsidiary is recorded at cost, and then adjusted at year end at fair value, this clearly shows the gain or loss at each year end from such investment as per market norms.

There is no statutory requirement to follow such initial value method for internal reporting.

The correct reason therefore, is:

It is a relatively easy method to apply.

7 0
3 years ago
Keyboarding or typing 100 words per minute can be thought of as a?
Mrrafil [7]

Answer:

Professional career typists

Explanation:

People that can type fast usually use a type of keyboarding known as touch typing. Basically the person typing knows the location of each key by muscle memory.  This increases the speed of typing. But only professional career typists are the ones that can type or exceed 100 words per minute.

4 0
3 years ago
Read 2 more answers
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