Question: Boeing Develop Not Dev. Develop Airbus Not develop -2, -2 3, 0 0, 3 0, 0 The table shows outcomes (profits) in relation to the

Boeing

Develop Not Dev.

Develop

Airbus

Not develop

-2, -2 3, 0

0, 3 0, 0

The table shows outcomes (profits) in relation to the firms' strategies, namely whether to proceed with developing new plane models. Airbus' two strategies are the rows, and Boeing's two strategies are in the columns. In each cell, the first entry is Airbus is profit, and the second is Boeing's. Now suppose that the European governments step in and pay for Airbus' fixed costs. That is, Airbus receives a government subsidy of $6 units for development. Will Airbus enjoy a monopoly in the new planes market? Thoroughly explain why or why not. Then, explain whether this subsidy policy will help or not help the European economy.

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