The following matrix shows the pricing strategies and resultant profits (in thousands of dollars) for two profit-maximizing firms.
Table 9-1
$\begin{array} {c}
\quad\quad \text { Firm B} \
\begin{array}{ | c | c | c | }
\hline \text { Firm } \mathrm { A } & \text { High } & \text { Low } \
\hline \text { High price } & 35,35 & 21,41 \
\hline \text { Low price } & 37,21 & 30,30 \
\hline
\end{array}
\end{array}$
-Refer to Table 9-1. If Firm A sets a high price, Firm B will:
A) also set a high price.
B) earn a profit of $35,000.
C) follow the low-price strategy.
D) earn a profit of $30,000.
E) earn a lower profit than Firm A.

Question

The following matrix shows the pricing strategies and resultant profits (in thousands of dollars) for two profit-maximizing firms.
Table 9-1
 $\begin{array} {c}
\quad\quad \text { Firm B}  \
\begin{array}{ | c | c | c | } 
\hline \text { Firm } \mathrm { A } & \text { High } & \text { Low } \
\hline \text { High price } & 35,35 & 21,41 \
\hline \text { Low price } & 37,21 & 30,30 \
\hline
\end{array} 
\end{array}$
-Refer to Table 9-1. If Firm A sets a high price, Firm B will:
A) also set a high price.
B) earn a profit of $35,000.
C) follow the low-price strategy.
D) earn a profit of $30,000.
E) earn a lower profit than Firm A.

Quizplus · Accepted Answer

If Firm A sets a high price, Firm B can choose between a high price, earning $35,000, or a low price, earning $41,000. To maximize profit, Firm B will choose the low-price strategy, earning more than with a high price.

The Following Matrix Shows the Pricing Strategies and Resultant Profits