Below is a profit pay-off matrix for two oligopoly firms: Calvin Inc.and Hobbs Ltd.Calvin's profits are shown in the upper portion of each box and Hobb's are in the lower portion.
-Refer to the information above to answer this question.Which of the following statements is correct if no agreement between Calvin and Hobbs is in place and each is considering what to do in terms of its advertising budget?
A) If Calvin adopts a high advertising budget and Hobbs does not,then Calvin will earn $300 in profits.
B) If Calvin adopts a high advertising budget and Hobbs does not,then Hobbs will earn $800 in profits.
C) If Hobbs adopts a high advertising budget and Calvin does not,then Calvin will earn $800 in profits.
D) If Hobbs adopts a high advertising budget and Calvin does not,then Hobbs will earn $300 in profits.
E) Collusion and trust between Calvin and Hobbs is necessary if both are to adopt and maintain a low advertising budget.
Correct Answer:
Verified
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