Bert and Ernie Are Noncolluding Oligopolists

question 5

Multiple Choice

Bert and Ernie are noncolluding oligopolists.If both choose a high price strategy,each makes $40 in profits; if both choose a low price strategy,each makes $30 in profits.If Bert chooses a high price strategy and Ernie chooses a low price strategy,Bert makes $20 in profits and Ernie makes $60 in profits,while if Bert chooses a low price strategy and Ernie chooses a high price strategy,Bert makes $60 in profits and Ernie makes $20 in profits.Which combination of pricing strategies would you expect Bert and Ernie to adopt if they act independently?

• A) Both choose a high price strategy.
• B) Both choose a low price strategy.
• C) Bert chooses a high price strategy and Ernie chooses a low price strategy.
• D) Bert chooses a low price strategy and Ernie chooses a high price strategy.

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Definitions:

Jean-Jacques Rousseau

An 18th-century Genevan philosopher, writer, and composer whose ideas on education, society, and government had a profound influence on the Enlightenment and the French Revolution.

Sensibility

The capacity to feel, perceive, or experience subjectively, often associated with acute perception of emotions and aesthetics.

Human Capacity

The potential or ability inherent in humans to think, learn, adapt, and engage in complex activities.

Fête Galante

French, “gallant [outdoor] party.”