Question: (10 marks: 1 mark each) Use the following payoff matrix for a 2-firm oligopoly to answer the questions below Firm A: High Price Low Price

(10 marks: 1 mark each) Use the following payoff matrix for a 2-firm oligopoly to answer the questions below Firm A: High Price Low Price A = 1000; A = 1250; High Price B = 1000 B = 300 Firm B: A = 300; A = 700; Low Price B = 1250 B = 700 a. If the two firms above collude, the profits for each of the 2 firms would be: Firm A Profits Firm B Profits b. Suppose the firms collude and agree to keep prices high. If firm A cheats and cuts price, it will result in which level of profit for the two firms: Firm A Profits Firm B Profits

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