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:

Promisee's Will

The intention or decision of the person to whom a promise is made in a contract.

Promisee's Death

In contract law, refers to the situation where the individual to whom a promise was made dies, impacting the enforcement or terms of the contract.

Policy

A principle or rule adopted or proposed by an organization or government to guide decisions and achieve rational outcomes.

Rights

Entitlements or permissions granted to individuals or organizations by legal systems, social conventions, or moral principles.