Oscar

-Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix above gives the economic profit that each firm can make. If Felix cheats on the agreement but Oscar complies, Felix makes an economic profit of _______ and Oscar makes an economic profit of _______.
A) $12 million; - $2 million
B) $10 million; $10 million
C) $1 million; $1 million
D) - $2 million; $12 million

Question

Oscar
 
-Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix above gives the economic profit that each firm can make. If Felix cheats on the agreement but Oscar complies, Felix makes an economic profit of _______ and Oscar makes an economic profit of _______.
A) $12 million; - $2 million 
B) $10 million; $10 million 
C) $1 million; $1 million 
D) - $2 million; $12 million

Quizplus · Accepted Answer

When Felix cheats on the agreement but Oscar complies, Felix maximizes its profit at the expense of Oscar, leading to Felix making $12 million and Oscar making -$2 million.

Oscar -Oscar and Felix Are the Only Firms That Clean Offices