The following table shows the payoff matrix of the two firms (Firm X and Firm Y), in dollars, when they advertise and when they do not advertise.Table 12.1

-According to the Table 12.1, if the firms collude and decide not to advertise, then their combined payoff is:
A)$250.
B)$260.
C)$330.
D)$300.
E)$280

Question

The following table shows the payoff matrix of the two firms (Firm X and Firm Y), in dollars, when they advertise and when they do not advertise.Table 12.1
 
-According to the Table 12.1, if the firms collude and decide not to advertise, then their combined payoff is:
A)$250. 
B)$260. 
C)$330. 
D)$300. 
E)$280

Quizplus · Accepted Answer

If the firms collude and decide not to advertise, they will each receive a payoff of $165 (cell 2,2 in the matrix). Since there are two firms, their combined payoff will be $165 x 2 = $330. This is the highest combined payoff they can achieve in this game, so colluding and not advertising is the best choice.

The Following Table Shows the Payoff Matrix of the Two