Mexico and the members of OPEC produce crude oil. Realizing that it would be in their best interests to form an agreement on production goals, a meeting is arranged and an informal, verbal agreement is reached. If both Mexico and OPEC abide by the agreement, then OPEC's profit will be $200 million and Mexico's profit will be $100 million. If both Mexico and OPEC cheat on the agreement, then OPEC's profit will be $175 million and Mexico's profit will be $80 million. If only OPEC cheats, then OPEC's profit will be $185 million, and Mexico's profit will be $60 million. If only Mexico cheats, then Mexico's profit will be $110 million, and OPEC's profit will be $150 million. You may find it helpful to fill in the payoff matrix below.
src="https://sciemce.com/media/4/ppg__rrr0818190951__f1q237g1.jpg" alt="" style="vertical-align: 0.0px;" height="203" width="377" />To OPEC, the payoff to abiding by the agreement is either:
A. $60 million or $100 million.
B. $175 million or $185 million.
C. $150 million or $200 million.
D. $200 million or $185 million.
Answer: C
Economics
src="https://sciemce.com/media/4/ppg__rrr0818190951__f1q237g1.jpg" alt="" style="vertical-align: 0.0px;" height="203" width="377" />To OPEC, the payoff to abiding by the agreement is either:
A. $60 million or $100 million.
B. $175 million or $185 million.
C. $150 million or $200 million.
D. $200 million or $185 million.
Answer: C
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