Use the table below to answer the following questions.
Table 15.2.2

-Table 15.2.2 gives the payoff matrix in terms of economic profit for firms A and B when there are two strategies facing each firm: (1)charge a low price, or (2)charge a high price. Refer to the nonrepeated game in the table. If both firms could successfully collude, what would be firm A's economic profit?
A)-$10
B)$2
C)$10
D)$20
E)$5

Question

Use the table below to answer the following questions.
Table 15.2.2
 
-Table 15.2.2 gives the payoff matrix in terms of economic profit for firms A and B when there are two strategies facing each firm: (1)charge a low price, or (2)charge a high price. Refer to the nonrepeated game in the table. If both firms could successfully collude, what would be firm A's economic profit?
A)-$10 
B)$2 
C)$10 
D)$20 
E)$5

Quizplus · Accepted Answer

If both firms collude, they will both choose to charge a high price, resulting in a total economic profit of $20 ($10 for each firm). Since they are colluding, they will split the profits evenly, meaning that firm A's economic profit would be $10.

Use the Table Below to Answer the Following Questions