Two Firms, Alpha and Beta, Produce Identical Computer Hard Drives

question 21

Multiple Choice

Two firms, Alpha and Beta, produce identical computer hard drives. They have identical costs, and the hard drives they produce are identical. The industry is a natural duopoly. Alpha and Beta enter into a collusive agreement, according to which they split the market equally. If both firms cheat on the agreement so the market is the same as a competitive market

• A) they will operate in a way indistinguishable from a monopoly.
• B) each firm will make zero economic profit.
• C) each firm will increase its economic profit.
• D) the price of a hard drive will be above marginal cost.

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Definitions:

Graph

A diagram representing data visually using lines, bars, or other symbols.

Equation

A statement of the equality of two algebraic expressions.

Verify

To prove or confirm that something is true, accurate, or genuine, often through the examination of evidence or conducting tests.

Pair of Equations

Two equations that are solved together to find a common solution for their variables.