Two Firms Operating in the Same Market Must Choose Between

question 89

Multiple Choice

Two firms operating in the same market must choose between a collude price and a cheat price. Firm A's profit is listed before the comma, B's outcome after the comma. If each firm tries to choose a price that is best for it, regardless of the other firm's price, which of these statements is correct?

• A) Firm A should charge the collude price, Firm B should charge a cheat price.
• B) Firm A should charge a cheat price, Firm B should charge a collude price.
• C) Both firms should charge a collude price.
• D) Both firms should charge a cheat price.

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Definitions:

Hourly Worker

An employee whose pay is based on the number of hours worked rather than receiving a fixed salary.

Shop Foreman

A supervisory role within a manufacturing or industrial site, overseeing the work of employees and ensuring the efficiency and quality of production.

Work-In-Process Inventory

Goods that are partially completed in the manufacturing process but not yet ready for sale.

Cost Of Goods Sold

In a perpetual inventory system, an account that records the cost of merchandise inventory used to make the sale. Also, it is the total cost of the goods which were sold to customers.