Suppose That Jay-Z and Beyonce Are Duopolists in the Music

question 328

Multiple Choice

Suppose that Jay-Z and Beyonce are duopolists in the music industry.In January,they agree to work together as a monopolist,charging the monopoly price for their music and producing the monopoly quantity of songs.By February,each singer is considering breaking the agreement.What would you expect to happen next?

• A) Jay-Z and Beyonce will determine that it is in each singer's best self interest to maintain the agreement.
• B) Jay-Z and Beyonce will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price will decrease.
• C) Jay-Z and Beyonce will each break the agreement. The new equilibrium quantity of songs will decrease, and the new equilibrium price will increase.
• D) Jay-Z and Beyonce will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price also will increase.

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Definitions:

Specific Excise Tax

A tax levied on a particular good or service, usually based on a fixed amount per unit, such as per liter of alcohol or per pack of cigarettes.

Unitary

A term in economics used to describe a situation where a change in one factor leads to a proportionate change in another factor.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the sensitivity of consumers to price changes.

Specific Excise Tax

A fixed tax imposed on a specific quantity of a good, regardless of its price, typically applied to items such as alcohol and tobacco.