Suppose Two Firms, FastNet and SmartCast Are the Only Fast

question 77

Multiple Choice

Suppose two firms, FastNet and SmartCast are the only fast Internet providers in a city. They have identical costs and one firm's service is a perfect substitute for the other's. The industry is a natural duopoly. Suppose that FastNet and SmartCast collude and agree to share the market equally. In this scenario, which of the following actions will maximise the industry's economic profit?

• A) Because the firms are colluding, the profit does not change regardless of whether the firms comply with agreement or cheat on the agreement.
• B) Both firms comply with the agreement.
• C) One of the firms complies with the agreement while the other firm cheats, producing more than the agreed amount.
• D) Both firms cheat on the agreement, producing more than the agreed amount.

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Definitions:

External Traumas

Events or experiences originating outside the individual that cause significant psychological distress or damage.

Carcinogens

Substances or exposures that are known to increase the risk of cancer by altering cellular metabolism or damaging DNA directly in cells.

Prokaryotes

Microorganisms that lack a distinct nucleus and other organelles enclosed within membranes, including bacteria and archaea.

Eukaryotes

Organisms whose cells contain a nucleus and other organelles enclosed within membranes, distinct from prokaryotes.