Suppose there are only two producers of aircraft in the world, AirCraft in the United States and AirEurope in the European Union. The following hypothetical payoff matrices show the profits (in millions of dollars) for each company. In the absence of subsidies, if only one company makes aircraft, it receives a profit of $75 million. If both companies decide to produce, they each lose $4 million. When a company decides not to produce, it earns zero profit. AirEurope Produce Not Produce Produce 4, -4 75, 0 AirCraft Not Produce 0, 75 0,0 Suppose that the European Union considers aircraft a strategic industry and gives AirEurope a $9 million subsidy if it produces. Fill in the cells of the following payoff matrix to reflect the $9 million subsidy. AirEurope Produce Not Produce Produce AirCraft Not Produce With a $9 million subsidy, regardless of whether AirCraft produces or not, AirEurope should not v produce if it wants to maximize its profit. True or False: Because AirEurope will enter the market given a $9 million subsidy, AirCraft should also produce in this industry. O True

Suppose there are only two producers of aircraft in the world, AirCraft in the United States and AirEurope in the European Union. The following hypothetical payoff matrices show the profits (in millions of dollars) for each company. In the absence of subsidies, if only one company makes aircraft, it receives a profit of $75 million. If both companies decide to produce, they each lose $4 million. When a company decides not to produce, it earns zero profit. AirEurope Produce Not Produce Produce 4, -4 75, 0 AirCraft Not Produce 0, 75 0,0 Suppose that the European Union considers aircraft a strategic industry and gives AirEurope a $9 million subsidy if it produces. Fill in the cells of the following payoff matrix to reflect the $9 million subsidy. AirEurope Produce Not Produce Produce AirCraft Not Produce With a $9 million subsidy, regardless of whether AirCraft produces or not, AirEurope should not v produce if it wants to maximize its profit. True or False: Because AirEurope will enter the market given a $9 million subsidy, AirCraft should also produce in this industry. O True

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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