Two Firms, Alpha and Beta, Produce Identical Computer Hard Drives

question 167

Multiple Choice

Two firms, Alpha and Beta, produce identical computer hard drives. They have identical costs, and the hard drives they produce are identical. The industry is a natural duopoly. Alpha and Beta enter into a collusive agreement, according to which they split the market equally. If both firms comply with the agreement

• A) together they will operate in a way indistinguishable from a monopoly.
• B) the price of a hard drive will be equal to marginal cost.
• C) each firm will make zero economic profit.
• D) the oligopoly will produce more hard drives than a profit-maximizing monopoly would produce.

---

Definitions:

Sales Revenue

The income received by a company from its sales of goods or services before any costs or expenses are deducted.

Gross Profit Percentage

A financial metric that shows the portion of sales revenue that exceeds the cost of goods sold, expressed as a percentage.

Net Sales

The net income from sales a business secures, after subtracting the expenses for returned products, allowances for damaged or missing merchandise, and any granted discounts.

Cost of Goods Sold

Cost of goods sold represents the direct expenses related to the production of goods that a company sells, including materials and labor.