The Following Matrix Shows the Pricing Strategies and Resultant Profits

question 47

Multiple Choice

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 the firms are able to enforce a collusive agreement, which of the following is most likely?

• A) Firm A will earn profit equal to $41,000.
• B) Firm A will earn a higher profit than Firm B.
• C) Firm A will set a high price while Firm B will set a low price.
• D) Firm A and Firm B will earn set a low price.
• E) Firm A and Firm B will earn profit equal to $35,000.

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Definitions:

Maximum Revenues

The highest amount of income that a company can generate from its sales before any deductions.

Seller

An individual or entity that offers goods or services in exchange for monetary compensation or other benefits.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given period of time.