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Mexico and the Members of OPEC Produce Crude Oil Refer to the Information Given Above

Question 99

Multiple Choice

Mexico and the members of OPEC produce crude oil.Realizing that it would be in their best interests to form an agreement on production goals,a meeting is arranged and an informal,verbal agreement is reached.If both Mexico and OPEC stick to the agreement,OPEC will earn profits of $200 million and Mexico will earn profits of $100 million.If both Mexico and OPEC cheat,then OPEC will earn $175 million and Mexico will earn $80 million.If only OPEC cheats,then OPEC earns $185 million and Mexico $60 million.If only Mexico cheats,then Mexico earns $110 million and OPEC $150 million.You may find it helpful to fill in the following payoff matrix in order to answer the question below.  OPEC  Mexico  Cheat  Abide  Cheat  Abide \begin{array}{c}\text { OPEC }\\\text { Mexico }\begin{array}{|c|c|c|}\hline& \text { Cheat } & \text { Abide } \\\hline \text { Cheat } & & \\\hline \text { Abide } & & \\\hline\end{array}\end{array}
Refer to the information given above.To OPEC,the payoff to not cheating is either:


A) $150 million or $200 million.
B) $200 million or $185 million.
C) $60 million or $100 million.
D) $175 million or $185 million.

Correct Answer:

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