(Table) Boeing and Airbus Can Either Comply with a Cartel

question 102

Multiple Choice

(Table) Boeing and Airbus can either comply with a cartel agreement or cheat. Based on the table, where Boeing's payoff is listed first in each outcome, if this game is played repeatedly and both firms adopt strategies such that the cooperative equilibrium emerges
$\begin{array}{c}\quad \quad \quad \quad \quad \quad \quad \quad \text { Airbus }\\\begin{array}{ccc}&& \text { Cheat } & \text { Comply } \\ \text {Boeing } &\text { Cheat } & \$ 0, \$ 0 & \$ 3 \text { million, }-\$ 1 \text { million } \\&\text { Comply } & -\$ 1 \text { million, } \$ 3 \text { milton } & \$ 2 \text { million, } \$ 2 \text { million }\end{array}\end{array}$

• A) both Boeing and Airbus will cheat.
• B) Boeing will cheat and Airbus will comply.
• C) Boeing will comply and Airbus will cheat.
• D) both Boeing and Airbus will comply.

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Definitions:

Minimum Price

The lowest legal price at which a good or service can be sold, often set to ensure producers can cover their costs.

Total Producer Surplus

The difference between the total revenue that producers receive and the minimum amount they would be willing to accept for their goods or services.

Producer Surplus

The difference between the amount producers are willing to sell a good for and the actual amount they receive due to market price.

Good X

An unspecified product or commodity in economics, used in theoretical models and discussions.