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AP® Microeconomics

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Difficult

The Cost of the Game

APMICR-HFX1NC
Delta Company Delta Company
Low High
Beta Company Low 6,000; 6,500 8,000; 8,500
Beta Company High 7,500; 7,000 7,000; 8,500

The payoff matrix above shows the poss​ible profits of Beta and Delta, two companies who compete within the same market and must each decide on either a low or high price. The first entry in each cell shows Beta Company’s expected profit while the second entry shows Delta Company’s expected profit.

If both firms incur an increase in marketing costs of 3,500, what will be Beta Company’s expected profit?

A

4,500

B

10,500

C

8,000

D

5,000

E

11,500