-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) $10 million; $10 million
B) $1 million; $1 million
C) -$2 million; $12 million
D) $12 million; -$2 million

Question

-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) $10 million; $10 million 
B) $1 million; $1 million 
C) -$2 million; $12 million 
D) $12 million; -$2 million

Quizplus · Accepted Answer

If Felix cheats on the agreement while Oscar complies, Felix makes an economic profit of $12 million, and Oscar makes an economic profit of -$2 million.

-Oscar and Felix Are the Only Firms That Clean Offices