Exhibit 10-6 Two-Firm Payoff Matrix

Multiple Choice

Exhibit 10-6 Two-Firm Payoff Matrix
-Assume costs are identical for the two firms in Exhibit 10-6. If both firms were allowed to form a cartel and agree on their prices, equilibrium would be established by:

A) Widget Co. charging the low price and Ajax Co. charging the high price.
B) Widget Co. charging the high price and Ajax Co. charging the low price.
C) Widget Co. charging the low price and Ajax Co. charging the low price.
D) Widget Co. charging the high price and Ajax Co. charging the high price.