Kellogg's and General Mills are two of the dominant breakfast cereal manufactures in the U.S. Each firm can either sign or not sign an exclusive contract with an Olympian gold-medal athlete to appear on the cover of a cereal box.
If both companies sign an athlete, they will each make 5 million in economic profit. If only firm signs, they earn 8 million in economic profit and the other firm incurs an economic loss of 1 million. If neither firm signs, they break even. Which of the following pairs of payoffs would NOT appear together in a square of the payoff matrix? A) 5 million; 5 million
B) 0 million; 0 million
C) 8 million; 5 million
D) -1 million; 8 million
Question 2
In the above figure, which area is the deadweight loss from a single-price monopoly?
A) E
B) E + H
C) E + H + K
D) E + H + K + J
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