4) Refer to the table below to answer the following questions. Table 2 Firm A R&D No R&D A:-$3 A: $25 R&D B: $15 B: $60 Firm B A: $60 A: $50 No R&D B: -$3 B: $35 Refer to Table 2. Firms A and B can conduct research and development (R&D) or not conduct it.

4) Refer to the table below to answer the following questions. Table 2 Firm A R&D No R&D A:-$3 A: $25 R&D B: $15 B: $60 Firm B A: $60 A: $50 No R&D B: -$3 B: $35 Refer to Table 2. Firms A and B can conduct research and development (R&D) or not conduct it.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4) Refer to the table below to answer the following questions.
Table 2
Firm A
R&D
A: $25
No R&D
A: -$3
R&D
B: $15
B: $60
Firm B
A: $60
A: $50
No R&D B: -$3
B: $35
Refer to Table 2. Firms A and B can conduct research and development (R&D) or not conduct it.
R&D is costly but can increase the quality of the product and increase sales. The payoff matrix is
the economic profits of the two firms and is given above, where the numbers are millions of
dollars.
a. What is Firm A Dominant Strategy?
b. What is Firm B Dominant Strategy?
c. What is the Nash Equilibrium?

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