Use the Following to Answer Question

question 92

Multiple Choice

Use the following to answer question:
Figure 11.3
-(Figure 11.3) The graph depicts a four-firm industry with no fixed costs. Suppose that the four firms are colluding by acting like a monopolist, with each firm producing one-fourth of the market output. If one of the firms cheats on the cartel agreement and produces an additional unit of output, the profits of each of the compliant firms go from:

• A) $36 to $40.
• B) $16 to $14.
• C) $8 to $12.
• D) $18 to $12.

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Definitions:

Availability Bias

The tendency to judge the likelihood of an event by the ease with which examples come to mind, which can lead to misjudgment of actual probability.

Reasoning Errors

Mistakes or flaws in the process of thinking, assessing, or coming to conclusions, often leading to inaccurate judgments or decisions.

Financial Decisions

Choices made regarding the management, investment, and utilization of funds within an organization.

Behavioral Finance

A field of finance that proposes psychology-based theories to explain stock market anomalies.