The table below shows the payoff matrix for a game between Toyota and Honda, each of which is contemplating building a factory in a new market. Each firm can either build a small factory (and produce a small number of cars) or build a large factory (and produce a large number of cars). Suppose no other car manufacturers are selling in this market. Part 2 Toyota's Decision Small Factory Large Factory Honda's Decision Small Factory High Industry Price Medium Industry Price Honda Profits: $ million Honda Profits: $ million Toyota Profits: $ million Toyota Profits: $ million Large Factory Medium Industry Price Low Industry Price Honda Profits: $ million Honda Profits: $ million Toyota Profits: $ million Toyota Profits: $ million Part 3 a. Assuming that the demand curve for cars in this new market is negatively sloped and unchanging, which of the following explains the prices and profits shown in the payoff matrix? A. At lower prices a larger combined output is produced and sold, but the profit margin (PATC) per vehicle apparently declines more than enough to offset the higher industry volume, yielding a smaller combined profit. B. When the two firms build different size factories, yet price similarly, the firm choosing the larger factory gains at the expense of the other. C. When the two firms build different size factories, yet price similarly, the firm choosing the smaller factory gains at the expense of the other. D. All of the above are correct. E. Both A and B are correct.