Suppose there are two breakfast restaurants in your college town, Waffle Kingdom and Flip's Flapjacks, and they decide to operate collusively as a cartel. If both restaurants abide by the cartel's agreement, then each will earn $100,000 in profit. If both restaurants cheat on the cartel's agreement, then each will earn $25,000 in profit. If one restaurant cheats and the other abides by the agreement, then the cheater will earn a profit of $150,000 while the firm that abides will have a loss of $12,500.1 The most profitable combined outcome for the two restaurants would bea. for both restaurants to abide by the cartel's agreement. b. for both restaurants to cheat on the cartel's agreement. c. for Waffle Kingdom to cheat on the agreement and Flip's Flapjacks to abide by the agreement. d. There is not a profitable outcome for both restaurants

Question

Business

Colby Irwin

3 August, 09:50

Suppose there are two breakfast restaurants in your college town, Waffle Kingdom and Flip's Flapjacks, and they decide to operate collusively as a cartel. If both restaurants abide by the cartel's agreement, then each will earn $100,000 in profit. If both restaurants cheat on the cartel's agreement, then each will earn $25,000 in profit. If one restaurant cheats and the other abides by the agreement, then the cheater will earn a profit of $150,000 while the firm that abides will have a loss of $12,500.1 The most profitable combined outcome for the two restaurants would bea. for both restaurants to abide by the cartel's agreement. b. for both restaurants to cheat on the cartel's agreement. c. for Waffle Kingdom to cheat on the agreement and Flip's Flapjacks to abide by the agreement. d. There is not a profitable outcome for both restaurants

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Answers (1)

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Bo Moyer · Answer 1

a. For both restaurants to abide by the cartel's agreement.

Explanation:

These type of agreements unite companies that have common interests or are in a similar industry to form an association.