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Figure: Pricing Strategy in Cable TV Market II
-(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.If the two firms in the cable TV market collude:
A)CableNorth will set a high price and earn $80,000,and CableSouth will set a low price and earn $130,000.
B)CableNorth will set a low price and earn $130,000,and CableSouth will set a high price and earn $80,000.
C)both firms will set a low price and each will earn $90,000.
D)both firms will set a high price and each will earn $100,000.

Question

Use the following to answer question:
Figure: Pricing Strategy in Cable TV Market II 
-(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.If the two firms in the cable TV market collude:
A)CableNorth will set a high price and earn $80,000,and CableSouth will set a low price and earn $130,000. 
B)CableNorth will set a low price and earn $130,000,and CableSouth will set a high price and earn $80,000. 
C)both firms will set a low price and each will earn $90,000. 
D)both firms will set a high price and each will earn $100,000.

Quizplus · Accepted Answer

If the two firms collude and set a high price, they will earn a combined profit of $200,000, which will be split equally between them resulting in $100,000 for each. Thus, option D is the correct choice.

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