The Table Below Shows Annual Profits Received by Two Oligopolists

question 52

Multiple Choice

The table below shows annual profits received by two oligopolists, Alpha and Beta, depending on whether each company decides whether to live within the collusive agreement they have signed to charge a high price, or to cheat and charge a lower price.

$\begin{array}{}& \text {beta's Strategies }\\ \text {AlPHA'sStrategies }&\begin{array}{|l|c|c|}\hline & \begin{array}{c}\text { Don't } \\\text { }\end{array} & \text { Cheat } \\\hline \text { Don'tCheat} & \begin{array}{c}\text { B: } \$ 5 \mathrm{~m} \\\text { A: } \$ 5 \mathrm{~m}\end{array} & \begin{array}{c}\text { B: } \$ 6 \mathrm{~m} \\\text { A } \$ 3 \mathrm{~m}\end{array} \\\hline & \begin{array}{c}\text { B: } \$ 3 \mathrm{~m}\end{array} & \text { B: } \$ 4 \mathrm{~m} \\ \text { Cheat } & \$ 6 \mathrm{~m} & \text { A: } \$ 4 \mathrm{~m} \\\hline\end{array}\\\end{array}$
-Based on the table,if both Alpha and Beta charge a lower price than the one they agreed upon,then:

• A)they both receive a profit of $4 million
• B)they both receive a profit of $5 million
• C)Alpha receives a profit of $6 million and Beta receives a profit of $3 million
• D)Alpha receives a profit of $3 million and Beta receives a profit of $6 million
• E)Alpha receives a profit of $20 million and Beta receives a profit of $18 million

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Definitions:

Utility Function

An economic tool that measures the preference level of consumers for different combinations of goods and services.

Private Consumptions

Private consumption refers to the spending on goods and services by individuals and households in an economy, excluding government expenditure.

Private Consumptions

The spending by households on goods and services, excluding purchases of new housing but including healthcare, education, and entertainment.

Majority Vote

A decision-making rule where the option that receives more than half of the votes is chosen.