Transcribed text From Image: his Question: 5 pts 5 of 20 (5 complete Trendy's and Style Store are the only two clothing manufacturers in a market. The two stores wish to collude to form a cartel. Based on the payoff matrix to the right, what ievel of output shouid each firm select if they wish to maximize joint profits? The first number in esch pair is Trendy's profit; the seoond is Style Store's profit. Alli numbers are in millions of do ars Low Output a Styie Store-High Outout 500 $750 Trendy shouid choose ▼ 1, and Style Store should choose 8500 S50 reason why this cartel is likely to fail is because 550 $150 it is not profitable. A O B. there are too many firms in the market. OC. the carte's output is too high. $750 $150 D esch fim has an incentive to chest and produce more. Click to select your answer Previous ^回后 o search PrtScr F12
Expert Chegg Question Answer:
a. Both would choose to produce LOW OUTPUT, as that would maxmise both the firm’s profit by earning $500 each.
b. Option D is correct.
Because by cheating each can earn $250 more by producing high output.