Smith petroleum has spent $204,000 to refine 62,000 gallons of petroleum distillate, which can be sold for $6.40 a gallon. alternatively, smith can process the distillate further and produce 56,000 gallons of cleaner fluid. the additional processing will cost $1.75 per gallon of distillate. the cleaner fluid can be sold for $9.00 a gallon. to sell the cleaner fluid, smith must pay a sales commission of $0.13 a gallon and a transportation charge of $0.18 a gallon. requirements: 1. diagram smith's decision alternatives. 2. identify the sunk cost. is the sunk cost relevant to smith's decision? 3. should smith sell the petroleum distillate or process it into cleaner fluid? show the expected net revenue difference between the two alternatives.

Suppose that fizzo and pop hop are the only two firms that sell orange soda. the following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: pop hopadvertise doesn’t advertisefizzo advertise 10, 10 18, 2doesn’t advertise 2, 18 11, 11for example, the upper right cell shows that if fizzo advertises and pop hop doesn't advertise, fizzo will make a profit of $18 million, and pop hop will make a profit of $2 million. assume this is a simultaneous game and that fizzo and pop hop are both profit-maximizing firms.if fizzo decides to advertise, it will earn a profit if pop hop advertises and a profit if pop hop does not advertise.if fizzo decides not to advertise, it will earn a profit if pop hop advertises and a profit if pop hop does not advertise.if pop hop advertises, fizzo makes a higher profit if it chooses (not to advertise, to .if pop hop doesn't advertise, fizzo makes a higher profit if it chooses (not to advertise, to . suppose that both firms start off not advertising. if the firms act independently, what strategies will they end up choosing? fizzo will choose to advertise and pop hop will choose not to advertise.both firms will choose to advertise.fizzo will choose not to advertise and pop hop will choose to advertise.both firms will choose not to advertise.again, suppose that both firms start off not advertising. if the firms decide to collude, what strategies will they end up choosing? fizzo will choose not to advertise and pop hop will choose to advertise.both firms will choose not to advertise.fizzo will choose to advertise and pop hop will choose not to advertise.both firms will choose to advertise.