A Two-Firm Cartel That Produces at a Constant Marginal Cost

question 80

Multiple Choice

A two-firm cartel that produces at a constant marginal cost of $20 faces a market inverse demand curve of P = 100 - 0.50Q. Initially, both firms agree to act like a monopolist, each producing 40 units of output. If one of the firms cheats on the agreement (assuming the other firm is compliant and continues to produce at 40 units) , how much output should the cheating firm produce to maximize profits?

• A) 41 units
• B) 60 units
• C) 80 units
• D) 44 units

Define key taxation concepts including marginal tax rate, horizontal equity, and the principles that justify certain taxes.

Discuss the trade-offs between equity and efficiency in tax systems and the justification of taxes based on the benefits principle.

Understand the concept of deadweight loss in the context of taxation and its impact on surplus.

Identify the purposes of specific taxes and government programs funded through taxation.

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Definitions:

Foreseeability

A concept in tort law where certain harms should have been reasonably predicted or anticipated as a result of one's actions or omissions.

But For Causation

A legal principle that determines causation by asking whether an injury would have occurred 'but for' the defendant's actions.

Actual Cause

The determination that the defendant’s breach of duty resulted directly in the plaintiff’s injury.

Duty Of Care

The legal obligation to exercise a level of caution and attention to avoid harm to others or their property.