A

This situation is not a prisoner’s dilemma

B

If Walmart lowers its price, Target should keep its prices high

C

If Target lowers its price and Walmart does not, Target will earn $20 million economic profit

D

Both Walmart and Target would jointly be better off if they could each keep their prices high

% of students got this right

A

A Nash equilibrium: both Walmart and Target keep prices high

B

A Nash equilibrium: both Walmart and Target lower prices

C

A Nash equilibrium: Target keeps prices high and Walmart lowers prices

% of students got this right

A

Each firm has an incentive to decrease its own output

B

Each firm has an incentive to raise its price

C

Each firm has an incentive to expand its output

D

Each firm’s marginal cost exceeds the price that the cartel sets

% of students got this right