MicroEconomics

1. Mary and Raj are the only two growers who provide organically grown corn to a local grocery store. They know that if they cooperated and produced less corn, they could raise the price of the corn. If they work independently, they will each earn $100. If they decide to work together and both lower their output, they can each earn $150. If one person lowers output and the other does not, the person who lowers output will earn $0 and the other person will capture the entire market and will earn $200. The below table represents the choices available to Mary and Raj. a) What is the best choice for Raj if he is sure that Mary will cooperate? Explain b} If Mary thinks Raj will cheat, what should Mary do and why? Explain Note: A = Work independently: B = Cooperate and Lower Output. (Each results entry lists Raj earnings first, and Mary's earnings second.) Mary A B Raj A ($100, $100) ($200, $0) B ($0, $200) ($150, $150)