Question 25Refer to Table 6-1 in Question 21. Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discussa strategy to optimize growth related profit (i.e., colluding to maximize their joint profits). They should both agree to.O increase their store and parking lot sizes.O refrain from increasing their store and parking lot sizes.O be more competitive in capturing market share.share the context of their conversation with the Federal Trade Commission. Oligopoly/Game Theory-- Questions 21-25 refer to Table 6-1 below.Two home-improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested inexpanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategicoutcomes that result from the game. Increases in annual profits of the two home-improvement stores are shown in the table below.Table 6-1Profits for Lopes & HomeMax under different strategiesLopesIncrease the size of storeDo not increase the size ofand parking lotstore and parking lotLopes $1.0 millionHomeMax - $1.5 millionLopes - $0.4 millionHomeMax = $3.4 millionIncrease the size of store andparking lotHomeMaxLopes $3.2 millionHomeMax = $0.6 millionLopes $2.0 millionHomeMax - $2.5 millionDo not increase the sizeof store and parking lot

Collusion is when firms shake hands and decide such strategy that would maximize their profits.

Question 25 Refer to Table 6-1 in Question 21. Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit (i.e., colluding to maximize their joint profits). They should both agree to. O increase their store and parking lot sizes. O refrain from increasing their store and parking lot sizes. O be more competitive in capturing market share. O share the context of their conversation with the Federal Trade Commission.

Question 25 Refer to Table 6-1 in Question 21. Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit (i.e., colluding to maximize their joint profits). They should both agree to. O increase their store and parking lot sizes. O refrain from increasing their store and parking lot sizes. O be more competitive in capturing market share. O share the context of their conversation with the Federal Trade Commission.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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