If Both Firms in a Duopoly Cheat on a Collusive

question 51

Multiple Choice

If both firms in a duopoly cheat on a collusive agreement, the price ________ and both firms are ________.

• A) falls; better off
• B) rises; worse off
• C) falls; worse off
• D) rises; better off

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Definitions:

Variable Manufacturing

Costs in manufacturing that vary directly with the level of production, such as raw materials and direct labor costs.

Variable Overhead Rate

The rate at which variable overhead costs are allocated to each unit of production, based on a certain activity level.

Direct Labor-Hours

Comprehensive work time recorded by employees who are directly engaged in producing goods.

Denominator Level

The level of activity chosen to allocate fixed costs in absorption costing, often representing capacity or expected production volume.