Suppose That Mystic Energy and E-Storm Are the Only Two

question 150

Multiple Choice

Suppose that Mystic Energy and E-Storm are the only two producers of hydrogen fuel cells. The market inverse demand curve for hydrogen fuel cells is P = 1,000 - 0.08Q, where Q is the number of fuels cells per month and P is the price per fuel cell. The marginal cost is constant at $500. Acting as a cartel, the owners of Mystic Energy and E-Storm agree to evenly split the market output. In this case, each firm earns a profit of $ ____.

• A) 2,343,750
• B) 781,250
• C) 390,625
• D) 1,562,500