Use the Information Below to Answer the Following Questions

question 19

Multiple Choice

Use the information below to answer the following questions.
Fact 14.2.1
Two firms,FastNet and SmartCast are the only Internet providers in a city.They have identical costs and one firm's service is a perfect substitute for the other firm's service.The industry is a natural duopoly.FastNet and SmartCast decide to collude and agree to share the market equally.
-Refer to Fact 14.2.1.Which of the following actions maximizes the industry's economic profit?

• A)Both firms cheat on the agreement.
• B)One firm cheats and one firm complies.
• C)Both firms comply with the agreement.
• D)New firms enter the market.
• E)Both firms charge the price that would exist in a perfectly competitive market.

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Definitions:

Required Rate of Return

The minimum annual percentage return an investor expects to earn when investing in a particular asset or project.

Sales Revenue

The income received by a company from its sales of goods or the provision of services.

Operating Assets

Assets that are used in the daily operations of a business to generate revenue, excluding investment and financial assets.

Flexible Budget Graphs

Visual representations that display the relationship between budgeted and actual results over a range of activity levels, helping to analyze performance.