The table below shows the payofl matrix for a game between Toyota and Honda. each of which is contemplating building a factory in a new market Each rm 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 mr manufacturers are selling In this market Small Factory Large Factory Toyota's Decision Small Factory High industry Price Honda Prots' $110 million Toyota Prots. $40 million Medium industry Price Honda Prots. $50 million Toyota Prots: $24 million Large Factory Medium industiy Price Honda Prots' $221 million Toyota Prots. $50 million Low industry Price Honda Prots. $28 million Toyota Prots: $28 million 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 prots shown in the payoff matrix? . All ofthe above are correct . EtothAand E are COI'I'ECT b. The cooperative outcome in this game would be that both lms build small factories. The likelihood of achieving the cooperative outcome depends upon c -. A. the rms' ability to collude and their Wlllll'lgnESS to live up to the agreement. Li C. the consent of the customers in this madret. up D. all ofthe above. c. According tothe payo matrix. Honda's best action d. According to the payoff matrix. Toyota's best action e. The non-cooperative outcome in this game is that the rms The nonrcooperalive outcome in this game E. the government's granting of collusion permission. is to build the large factory is to build the large factory both build large factories 's aNash equilibrium . When the two firms build different size factories yet price similarly. the rm choosing the larger factory gains at the expense of the other . When the two firms build different size factories yet price similarly. the rm choosing the smaller factory gains at the expense of the other. . At lower prices a larger combined output is produced and sold. but the prot margin (P ATC) per vehicle apparentty declines more than enough to oset the higher industry volume . yielding a smaller combined prot