Why do similar businesses often cluster together in the same area?

Understanding Hotelling's Model and Nash Equilibrium

Interactive Video
•
Business, Mathematics, Social Studies
•
9th - 12th Grade
•
Hard

Olivia Brooks
FREE Resource
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10 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
To attract more customers
To increase prices
To share resources
To avoid competition
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
In the initial setup, where should the ice cream cart be placed to serve the most customers?
At one end of the beach
In the middle of the beach
Near the parking lot
Close to the water
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What was the agreed-upon strategy between the two ice cream vendors initially?
To set up in the middle of the beach
To split the beach in half and set up in the middle of their territories
To set up next to each other
To set up at opposite ends of the beach
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What happens when one vendor moves closer to the center of the beach?
They gain more customers
They lose customers
They have to lower prices
They have to move back
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is a Nash Equilibrium in the context of the ice cream vendors?
A situation where both vendors lose customers
A situation where one vendor dominates the market
A situation where neither vendor can improve their position by changing strategy
A situation where both vendors maximize their profits
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Why is the Nash Equilibrium not a socially optimal solution?
Because it increases prices
Because it reduces the number of vendors
Because it leads to a monopoly
Because customers have to walk further
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How do businesses compete in the real world beyond location?
Through marketing strategies and product differentiation
By increasing the number of locations
By offering free products
By reducing the number of competitors
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