Question

Which one is the best answer

1.Agreeing to be part of a price-fixing cartel is:
a.unlikely to yield maximum prices or profits for very long time
b.difficult to maintain, but almost guaranteed to ensure maximum profit
c.illegal in most countries
d.a and b
e.a and c

2.In a duopoly situation with two firms A and B, A's best-response curve:
a. gives A's profit-maximizing price given B's anticipated price.
b. gives A's minimax solution.
c. is derived based on the underlying interdependance of A and B.
d. both a and c.
e. all of the above.

Answer 1

Hummm. tough questions.
Price fixing cartels are, initially designed to deliver maximum profits. However, they are difficult to maintain; too much incentives to cheat. So b is true. Since they are difficult to maintain, they are unlikely to yield maximum profits for a very long time. Take out "prices" from a and a is true. Finally they are illegal in most non-third-world countries. So c is true.

2) I think a