Use the Following to Answer Questions

question 204

Multiple Choice

Use the following to answer questions:
Scenario: Two Identical Firms
Two identical firms make up an industry in which the market demand curve is represented by Q = 5,000 - 4P, where Q is the quantity demanded and P is price per unit. The marginal cost of producing the good in this industry is constant and equal to $650. Fixed cost is zero.
-(Scenario: Two Identical Firms) Suppose the two firms in the scenario Two Identical Firms decide to cooperate and collude, resulting in the same amount of production for each firm. What is the profit-maximizing price and output for the industry?

• A) P = $400; Q = 5,000
• B) P = $950; Q = 1,200
• C) P = $600; Q = 1,500
• D) P = $300; Q = 2,000

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