(Scenario: Two Identical Firms)Use Scenario: Two Identical Firms

question 262

Multiple Choice

(Scenario: Two Identical Firms) Use Scenario: Two Identical Firms.If one firm decides to cheat,the cheating firm will: Scenario: Two Identical Firms
Two identical firms make up an industry in which the market demand curve is represented by Q = 5,000 - 4P,where Q is the quantity demanded and P is price per unit.The marginal cost of producing the good in this industry is constant and equal to $650.Fixed cost is zero.

• A)be able to increase its profits initially.
• B)find that cheating leads to a decrease in its profits alone.
• C)find that cheating initially leads to an increase in both firms' profits.
• D)find that the other firm has an increase in its profits alone.

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Definitions:

Capital Account Balances

Refers to the amounts recorded in an entity's equity section representing contributions from owners and retained earnings.

Predistribution Plan

A pre-arranged strategy detailing the allocation of assets or earnings before they are officially dispersed.

Profit and Loss Ratios

Financial metrics that analyze a company's profitability, efficiency, and performance by comparing various figures from the profit and loss statement.

Capital Account Balances

The net result of public and private international investments flowing in and out of a country, including financial and capital assets.