Consider the following game in which two firms decide how much of a homogeneous good to produce. The annual profit payoffs for each firm are stated in the cell of the game matrix, and Firm A's payoffs appear first in the payoff pairs: Firm B - low output Firm B - high output Firm A - low output 300, 250 200, 100 Firm A - high output 200, 75 75, 100 What is the Nash equilibrium for this game? A. Both firms producer low levels of output B. Firm A produces high levels of output, and Firm B produces low output. C. Both firms produce high levels of output D. Firm A produces low levels of output, and Firm B produces high output. E. There is more than one Nash equilibrium for this game

What is the Nash equilibrium for this game?

Explanation:

Nash equilibrium is achieved if both players' dominant strategies are the same:

                                                 Firm A

                                      low output              high output

             low output       300 /                       200 /  

Firm B                                      250                         75

             high output      200 /                         75 /

                                                 100                         100

Firm A's dominant strategy = low output with an expected value of $300 + $200 = $500

Firm B's dominant strategy = low output with an expected value of $250 + $75 = $325

Since both firms' dominant strategies is to produce low outputs, then that is the Nash equilibrium.

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answer; 33,000;