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

question 36

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 cheat on the agreement so the market is the same as a competitive market,

• A)each firm makes zero economic profit in the long run.
• B)each firm makes the monopoly profit.
• C)the oligopoly will produce fewer hard drives than a profit-maximizing monopoly would produce.
• D)the oligopoly will produce the same number of hard drives as a profit-maximizing monopoly would produce.
• E)each firm incurs an economic loss and exits the market in the long run.

Analyze the relationship between economic growth, government budget deficits/surpluses, and the national debt.

Comprehend the role and impact of automatic stabilizers in smoothing out economic cycles.

Understand the implications of government borrowing and the crowding-out effect in fiscal policy.

Appreciate the distinction between fiscal policy and monetary policy, including their goals and means.

---

Definitions:

Commerce Clause

A provision in the United States Constitution that grants Congress the power to regulate trade between states, foreign nations, and Indian tribes, forming the basis for much federal legislation on economic regulation.

Federal Supremacy

The principle that federal law takes precedence over state laws and constitutions when they are in conflict, based on the Supremacy Clause of the U.S. Constitution.

Inconsistent State Laws

Situations where state laws are in conflict with each other or with federal law, leading to legal uncertainties and challenges.

Federal Laws

Laws passed by the national government of a country, applicable across the entire country, as opposed to state or local laws which only have local jurisdiction.