Exhibit 10-7 Two-Firm Payoff Matrix

Multiple Choice

Exhibit 10-7 Two-Firm Payoff Matrix
-Assume costs are identical for the two firms in Exhibit 10-7. If both firms were allowed to form a cartel and agree on their prices, equilibrium would be established by:

A) Camel charging the low price and Marlboro charging the high price.
B) Camel charging the high price and Marlboro charging the low price.
C) Camel charging the high price and Marlboro charging the high price.
D) Camel charging the low price and Marlboro charging the low price.