Compare the profits of Firm A when both firms respect the collusive agreement to the profits of Firm A when Firm A secretly cheats on the agreement. How much additional profit would Firm A earn by secretly cheating on the agreement to collude? Round your answer to the nearest whole number. Firm A's additional profit when cheating: $
Compare the profits of Firm A when both firms respect the collusive agreement to the profits of Firm A when Firm A secretly cheats on the agreement. How much additional profit would Firm A earn by secretly cheating on the agreement to collude? Round your answer to the nearest whole number. Firm A's additional profit when cheating: $
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Compare the profits of Firm A when both firms respect the collusive agreement to the profits of Firm A when Firm A secretly
cheats on the agreement. How much additional profit would Firm A earn by secretly cheating on the agreement to collude?
Round your answer to the nearest whole number.
Firm A's additional profit when cheating: $
Compare the profits of Firm A when both firms respect the collusive agreement to the profits of Firm A when both firms cheat
on the agreement. By how much would the profit of Firm A fall if both firms cheat on the agreement to collude? Round your
answer to the nearest whole number.
Firm A's lost profits when both cheat: $

Transcribed Image Text:The accompanying payoff matrix presents the profits for Firm A and Firm B under two pricing strategies.
Firm A's strategy
High price
Low price
Firm A Profit = $81
Firm A Profit = $99
High price
Firm B Profit = $81
Firm B Profit = $39
Firm B's strategy
Firm A Profit = $39
Firm A Profit = $65
Low price
Firm B Profit = $99
Firm B Profit = $65
Suppose both firms have agreed to employ strategies that maximize their combined profits. How will the firms act?
Firm A will
Firm B will
Set a high price
Set a high price
Set a low price
O Set a low price
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